The Impact Of Macroeconomic Variables On The Debt Issuing Behaviour Of Corporates
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| Author | : |
| Publisher | : |
| Total Pages | : |
| Release | : 2015 |
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I study the impact of macroeconomic conditions on the dispersion of corporate debt maturities ("granularity of corporate debt") from April 2004 to June 2014 for the S&P 500 firms. I compute measures of granularity based on data from Thomson Reuters. As modeled in the prior literature, firms are expected to manage the granularity of their debt due to the rollover risk that varies with the market conditions. The novelty and contribution of this thesis consist in the following empirical findings. First, the granularity of corporate debt is reliably associated with a set of macroeconomic variables. However, the results suggest that the pricing considerations may play a large part in determining the maturity composition along with the rollover risk. Second, I notice that the firms that did not issue bonds during the financial crisis of 2007-2009 differ from those that did. Moreover, for the former, contemporaneous interest rates seem to be the most important factor influencing the granularity of corporate debt, while for the latter, the credit spreads and the performance of the stock market have high explanatory power.
| Author | : Mr.Abdul Abiad |
| Publisher | : International Monetary Fund |
| Total Pages | : 26 |
| Release | : 2015-05-04 |
| Genre | : Business & Economics |
| ISBN | : 1484361555 |
This paper provides new evidence of the macroeconomic effects of public investment in advanced economies. Using public investment forecast errors to identify the causal effect of government investment in a sample of 17 OECD economies since 1985 and model simulations, the paper finds that increased public investment raises output, both in the short term and in the long term, crowds in private investment, and reduces unemployment. Several factors shape the macroeconomic effects of public investment. When there is economic slack and monetary accommodation, demand effects are stronger, and the public-debt-to-GDP ratio may actually decline. Public investment is also more effective in boosting output in countries with higher public investment efficiency and when it is financed by issuing debt.
| Author | : Huson Joher Ali Ahmed |
| Publisher | : |
| Total Pages | : |
| Release | : 2018 |
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This paper investigates the impact of consumer sentiment on firms' debt policy decisions and identifies the channels through which consumer sentiment impacts the corporate debt policy of U.S. firms at the sectoral level. Using the panel frameworks, the overall findings suggest a clear link between consumer sentiment which reflects personal financial conditions, business conditions and buying conditions for major ticket items and the choice of debt financing after controlling for firms specific factors and macroeconomic factors. The results also show that the effects of consumer sentiment on firms leverage policy are primary conditioning factors, due to the interaction between optimism about economic outlook reflected in consumer sentiment index and firm profitability. Given no direct link between consumer sentiment and firm leverage policy, we also search for a link via the consumption channel. I find that consumer sentiment positively affects personal consumption expenditures, confirming a link between consumer sentiment and corporate debt policy. Further the results from quantile regressions highlight how the leverage distribution is differentially affected by changes in both consumer sentiment and other control variables. In particular, firms in lower leverage quantiles appear to increase leverage as consumer optimism increases, to reap tax shield benefits. Further, the findings are robust to different time horizons for the pre- and post-crisis periods and consistent across alternative measures of sentiment and debt policy.
| Author | : Ruud A. de Mooij |
| Publisher | : International Monetary Fund |
| Total Pages | : 29 |
| Release | : 2011-04-01 |
| Genre | : Business & Economics |
| ISBN | : 1455253340 |
Although the empirical literature has long struggled to identify the impact of taxes on corporate financial structure, a recent boom in studies offers ample support for the debt bias of taxation. Yet, studies differ considerably in effect size and reveal an equally large variety in methodologies and specifications. This paper sheds light on this variation and assesses the systematic impact on the size of the effects. We find that, typically, a one percentage point higher tax rate increases the debt-asset ratio by between 0.17 and 0.28. Responses are increasing over time, which suggests that debt bias distortions have become more important.
| Author | : Xin (Simba) Chang |
| Publisher | : |
| Total Pages | : 47 |
| Release | : 2018 |
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| ISBN | : |
We examine how time-varying macroeconomic conditions affect firms' financing decisions. A principal components decomposition of several macroeconomic variables characterizes three phases of the business cycle relative to recessions: early recovery, robust recovery, and economic crest; a fourth represents “windows of opportunity” in capital markets that are unrelated to recessions. This characterization yields results that traditional approaches miss. Specifically, debt issuance exhibits a non-monotonic pattern during the upward phase of the business cycle: it declines in robust recovery relative to recessions but peaks at the economic crest. Financially constrained firms issue more equity during windows of high stock market valuation, whereas unconstrained firms time debt issuance in response to debt market spreads.
| Author | : M. Ayhan Kose |
| Publisher | : World Bank Publications |
| Total Pages | : 403 |
| Release | : 2021-03-03 |
| Genre | : Business & Economics |
| ISBN | : 1464815453 |
The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
| Author | : Ruud A. de Mooij |
| Publisher | : International Monetary Fund |
| Total Pages | : 20 |
| Release | : 2017-02-10 |
| Genre | : Business & Economics |
| ISBN | : 1475578296 |
Tax provisions favoring corporate debt over equity finance (“debt bias”) are widely recognized as a risk to financial stability. This paper explores whether and how thin-capitalization rules, which restrict interest deductibility beyond a certain amount, affect corporate debt ratios and mitigate financial stability risk. We find that rules targeted at related party borrowing (the majority of today’s rules) have no significant impact on debt bias—which relates to third-party borrowing. Also, these rules have no effect on broader indicators of firm financial distress. Rules applying to all debt, in contrast, turn out to be effective: the presence of such a rule reduces the debt-asset ratio in an average company by 5 percentage points; and they reduce the probability for a firm to be in financial distress by 5 percent. Debt ratios are found to be more responsive to thin capitalization rules in industries characterized by a high share of tangible assets.
| Author | : T. Todd Smith |
| Publisher | : International Monetary Fund |
| Total Pages | : 88 |
| Release | : 1995-07-01 |
| Genre | : Business & Economics |
| ISBN | : 1451848870 |
This paper surveys markets for corporate debt securities in the major industrial countries and the international markets. The discussion includes a comparison of the sizes of the markets for various products, as well as the key operational, institutional, and legal features of primary and secondary markets. Although there are some signs that debt markets may be emphasized in the future by some countries, it remains true that North American debt markets are the most active and liquid in the world. The international debt markets are, however, growing in importance. The paper also investigates some of the reasons for the underdevelopment of domestic bond markets and the consequences of firms shifting their debt financing needs from banks to securities markets.
| Author | : Jeffrey M. Wooldridge |
| Publisher | : South Western Educational Publishing |
| Total Pages | : 865 |
| Release | : 2009 |
| Genre | : Econometrics |
| ISBN | : 9780324788907 |
INTRODUCTORY ECONOMETRICS: A MODERN APPROACH, 4e International Edition illustrates how empirical researchers think about and apply econometric methods in real-world practice. The text's unique approach reflects the fact that undergraduate econometrics has moved beyond just a set of abstract tools to being genuinely useful for answering questions in business, policy evaluation, and forecasting environments. The systematic approach, which reduces clutter by introducing assumptions only as they are needed, makes absorbing the material easier and leads to better econometric practices. Its unique organization separates topics by the kinds of data being analyzed , leading to an appreciation for the important issues that arise in drawing conclusions from the different kinds of data economists use. Packed with relevant applications, INTRODUCTORY ECONOMETRICS offers a wealth of interesting data sets that can be used to reproduce the examples in the text or as the starting point for original research projects.
| Author | : Mr.Stijn Claessens |
| Publisher | : International Monetary Fund |
| Total Pages | : 66 |
| Release | : 2013-01-30 |
| Genre | : Business & Economics |
| ISBN | : 1475561008 |
This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.
