The Network of Firms Implied by the News

We show that the news is a rich source of data on distressed firm links that drive firm-level and aggregate risks. The news tends to report about links in which a less popular firm is distressed and may contaminate a more popular firm. This constitutes a contagion channel that yields predictable returns and downgrades. Shocks to the degree of news-implied firm connectivity predict increases in aggregate volatilities, credit spreads, and default rates, and declines in output. To obtain our results, we propose a machine learning methodology that takes text data as input and outputs a data-implied firm network

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Year of publication:	[2021]
Authors:	Schwenkler, Gustavo ; Zheng, Hannan
Publisher:	[S.l.] : SSRN
Subject:	Unternehmensnetzwerk \| Business network \| Theorie \| Theory

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