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From Debt Reset to Growth Onset? Sovereign Debt Restructuring and Firm Performance in Developing Countries

Author

Listed:
  • Luc Jacolin
  • Quentin Dufresne
  • Marin Ferry

Abstract

Leveraging a unique dataset that combines country-level information on debt restructuring with firm-level data from the World Bank Enterprise Surveys (WBES) spanning from 2004 to 2023, we analyze the effects of debt restructuring on firm sales growth. Using recent advancements in difference-in-differences estimation to account for the staggered implementation of restructurings, we find that sovereign debt restructuring increases firm performance by 5–9 percentage points, with stronger effects for private, domestically-owned firms and those reliant on public and financial services. The impact varies by debt type (domestic or external), creditor composition, and implementation speed. Swift external restructurings led by official creditors, such as the Paris Club, yield the most substantial positive effects, whereas other types of restructurings show no significant impact on private sector growth.

Suggested Citation

  • Luc Jacolin & Quentin Dufresne & Marin Ferry, 2025. "From Debt Reset to Growth Onset? Sovereign Debt Restructuring and Firm Performance in Developing Countries," Working papers 991, Banque de France.
    • Handle: RePEc:bfr:banfra:991
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    File URL: https://www.banque-france.fr/system/files/2025-05/WP991_0.pdf
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    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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