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Corporate financial structure and financial stability

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  • Davis, E. Philip
  • Stone, Mark R.

Abstract

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 debtequity 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.
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  • Davis, E. Philip & Stone, Mark R., 2004. "Corporate financial structure and financial stability," Journal of Financial Stability, Elsevier, vol. 1(1), pages 65-91, September.
    • Handle: RePEc:eee:finsta:v:1:y:2004:i:1:p:65-91
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