Corporate Financial Structure and Financial Stability
49 Pages Posted: 15 Feb 2006
Date Written: July 2004
This paper uses flow-of-funds and balance sheet data to analyze the impact of financial crises on corporate financing and GDP in a range of countries. Post-crisis GDP contractions are mainly accounted for by declines in investment and inventory and are more severe for emerging market countries. Post-crisis investment and inventory declines are correlated with the corporate debt-equity ratio. Although companies in emerging market countries hold more liquidity, this is not sufficient to prevent a greater response of expenditures to shocks. Industrial countries appear to benefit from an offsetting increase in bond issuance.
Keywords: Corporate finance, financial instability
JEL Classification: E22, E44, G31
Suggested Citation: Suggested Citation