The Real Consequences of Market Segmentation

@article{Chernenko2012TheRC,
  title={The Real Consequences of Market Segmentation},
  author={S. Chernenko and Adi Sunderam},
  journal={Review of Financial Studies},
  year={2012},
  volume={25},
  pages={2041-2069}
}
We study the real effects of market segmentation due to credit ratings by using a matched sample of firms just above and just below the investment-grade cutoff. These firms have similar observables, including average investment rates. However, flows into high-yield mutual funds have an economically significant effect on the issuance and investment of the speculative-grade firms relative to their matches, especially for firms likely to be financially constrained. The effect is associated with… Expand
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