Life Expectancy and Corporate Debt Markets

We study the implications of longevity shocks for corporate bond markets, corporate debt financing and investment through the lens of life insurers. Longevity shocks shift life insurers' demand for bonds of specific maturities. When longevity increases, life insurance companies increase their investment in long-term bonds. Consequently, long-term bond yields decline. The corporate sector absorbs these shocks by shifting to long-term debt issuances while increasing investment in long-term assets. Our results suggest that improvements in life expectancy reduce long-term corporate financing costs and stimulate long-term corporate investment