Growth of Global Corporate Debt: Main Facts and Policy Challenges

World Bank Policy Research Working Paper No. 9394 (2020)

Oxford Research Encyclopedia of Economics and Finance (2020)

44 Pages Posted: 13 Sep 2020

See all articles by Facundo Abraham

Facundo Abraham

World Bank

Juan Jose Cortina Lorente

World Bank

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Date Written: September 10, 2020

Abstract

This paper surveys the literature to document the main stylized facts, risks, and policy challenges related to the expansion of global nonfinancial corporate debt after the 2008–09 global financial crisis. Nonfinancial corporate debt steadily increased after the crisis, especially in emerging economies. Between 2008 and 2018, corporate debt increased from 56 to 96 percent of gross domestic product in emerging economies, whereas this ratio remained stable in developed economies. Nonfinancial corporate debt was mainly issued through bond markets, and its growth can be largely attributed to accommodative monetary policies in developed economies. Whereas increased debt financing has some positive aspects, it has also amplified firms’ solvency risks and exposure to changes in market conditions, such as the economic downturn triggered by the COVID-19 pandemic. Because capital markets have a larger role in firm financing, policy makers have limited tools to mitigate the risks of growing firm debt.

Keywords: capital raising, corporate bonds, corporate financing, currency risk, debt, emerging economies, foreign currency debt, global financial crisis

JEL Classification: F32, F34, F65, G0, G10, G15, G30

Suggested Citation

Abraham, Facundo and Cortina Lorente, Juan Jose and Schmukler, Sergio, Growth of Global Corporate Debt: Main Facts and Policy Challenges (September 10, 2020). World Bank Policy Research Working Paper No. 9394 (2020), Oxford Research Encyclopedia of Economics and Finance (2020), Available at SSRN: https://ssrn.com/abstract=3690997 or http://dx.doi.org/10.2139/ssrn.3690997

Facundo Abraham (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Juan Jose Cortina Lorente

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Sergio Schmukler

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN MC 3-301
Washington, DC 20433
United States
202-458-4167 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://www.worldbank.org/en/about/people/s/sergio-schmukler

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