Stress Testing and Corporate Finance

33 Pages Posted: 22 Sep 2010

See all articles by Olivier de Bandt

Olivier de Bandt

Banque de France - Economic Study and Research Division

Catherine Bruneau

Université Paris X Nanterre; Université Paris I Panthéon-Sorbonne

Widad El Amri

Banque de France

Date Written: March 1, 2008

Abstract

The article contributes to the literature on financial fragility, studying how macro-economic shocks affect supply and demand in the corporate debt market. We take into account the effect of the competitive environment, as well as the risk level, measured by companies' default rate. The model is estimated using data from the Harmonised BACH database of corporate accounts for large euro area countries on the 1993-2005 period, in order to carry out an illustrative stress testing exercise. We measure the impact of large macroeconomic shocks (a severe recession and a sharp increase in oil prices) on the equilibrium in the debt market.

Keywords: Corporate Finance, Debt, Financial Fragility, Stress Tests, Panel Data

JEL Classification: G3, C33, E44

Suggested Citation

de Bandt, Olivier and Bruneau, Catherine and El Amri, Widad, Stress Testing and Corporate Finance (March 1, 2008). Banque de France Working Paper No. 203, Available at SSRN: https://ssrn.com/abstract=1680210 or http://dx.doi.org/10.2139/ssrn.1680210

Olivier De Bandt (Contact Author)

Banque de France - Economic Study and Research Division ( email )

31, rue Croix des Petits Champs
75049 Paris Cedex 01
FRANCE
(33 1) 42 92 28 80 (Phone)
(33 1) 42 92 27 66 (Fax)

Catherine Bruneau

Université Paris X Nanterre ( email )

Room G301, Building G
92001 Nanterre Cedex, 92001
France

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France

Widad El Amri

Banque de France ( email )

Paris
France

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