Corporate balance sheet adjustment: stylized facts, causes and consequences
AbstractWe analyse corporate balance sheet adjustment episodes in Germany and Japan, as well as a sample of 30 countries, using national account data. Corporate balance sheet adjustment tends to be long lasting and associated with a strong impact on current accounts, wages and investment. Adjustment episodes lead to significant changes in corporate balance sheet ratios with a buildup of liquidity and a reduction of leverage. The adjustment is generally achieved by reducing investment and increasing savings on the back of a falling wage share. A panel econometric exercise shows that balance sheet adjustment periods are triggered by macroeconomic downturns as well as balance sheet stress due to high debt, low liquidity and negative equity price shocks.
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Bibliographic InfoPaper provided by Bruegel in its series Working Papers with number 696.
Date of creation: Feb 2012
Date of revision:
Other versions of this item:
- Eric Ruscher & Guntram B. Wolff, 2013. "Corporate Balance Sheet Adjustment: Stylized Facts, Causes and Consequences," Review of Economics, Lucius & Lucius, vol. 64(2), pages 117-138.
- Eric Ruscher & Guntram Wolff, 2012. "Corporate balance sheet adjustment: stylized facts, causes and consequences," European Economy - Economic Papers 449, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
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- Cussen, Mary & O'Leary, Brídín, 2013. "Why are Irish Non-Financial Corporations so Indebted?," Quarterly Bulletin Articles, Central Bank of Ireland, pages 104-118, January.
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