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Corporate Debt Structure and Economic Recoveries

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  • Thomas Grjebine
  • Urszula Szczerbowicz
  • Fabien Tripier

Abstract

This paper analyzes the business cycle behavior of the corporate debt structure and its interaction with economic recovery. The debt structure is measured as the share of bonds in the total credit to non-financial corporations for a quarterly panel of twenty five economies over the period 1989-2013. We first show that the substitution of loans for bonds in recoveries is a regular property of business cycles. Secondly, we provide evidence that economies with high bond share and important bond-loan substitution recover from the recessions faster. The relation between the corporate debt structure and the economic recovery is maintained when controls for the developments of financial markets are introduced. A theoretical model is developed to explain this relation as the outcome of financial constraints on bank credit supply.

Suggested Citation

  • Thomas Grjebine & Urszula Szczerbowicz & Fabien Tripier, 2014. "Corporate Debt Structure and Economic Recoveries," Working Papers 2014-19, CEPII research center.
  • Handle: RePEc:cii:cepidt:2014-19
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    Cited by:

    1. Pagliacci, Carolina, 2020. "Financial constraints and inflation in Latin America: The impacts of bond financing and depreciations on supply inflation," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 379-397.
    2. Iwata, Kazumasa & Jean, Sébastien & Kastrop, Christian & Loewald, Chris & Véron, Nicolas, 2018. "T20 resilience and inclusive growth," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW), vol. 12, pages 1-10.
    3. Martins, Manuel M.F. & Verona, Fabio, 2021. "Bond vs. bank finance and the Great Recession," Finance Research Letters, Elsevier, vol. 39(C).
    4. Sam Langfield & Marco Pagano, 2016. "Bank bias in Europe: effects on systemic risk and growth," Economic Policy, CEPR;CES;MSH, vol. 31(85), pages 51-106.
    5. Thomas Drechsel, 2018. "Earnings-Based Borrowing Constraints and Macroeconomic Fluctuations," 2018 Papers pdr141, Job Market Papers.
    6. Joost Bats, 2020. "Corporates' dependence on banks: The impact of ECB corporate sector purchases," DNB Working Papers 667, Netherlands Central Bank, Research Department.
    7. Kanwal Iqbal Khan & Faisal Qadeer & Mário Nuno Mata & Rui Miguel Dantas & João Xavier Rita & Jéssica Nunes Martins, 2021. "Debt Market Trends and Predictors of Specialization: An Analysis of Pakistani Corporate Sector," JRFM, MDPI, vol. 14(5), pages 1-16, May.
    8. Holm-Hadulla, Fédéric & Thürwächter, Claire, 2021. "Heterogeneity in corporate debt structures and the transmission of monetary policy," European Economic Review, Elsevier, vol. 136(C).
    9. Thomas GRJEBINE & Urszula SZCZERBOWICZ & Fabien TRIPIER, 2018. "Corporate debt structure and economic recoveries: a cross-country analysis," Rue de la Banque, Banque de France, issue 63, June.
    10. Simon Schumacher & Stephan Paul, 2017. "Capital Markets Union – Promising Prospects for Corporate Financing?," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 18(3), pages 289-304, August.
    11. Cappiello, Lorenzo & Holm-Hadulla, Fédéric & Maddaloni, Angela & Mayordomo, Sergio & Unger, Robert & Arts, Laura & Meme, Nicolas & Asimakopoulos, Ioannis & Migiakis, Petros & Behrens, Caterina & Moura, 2021. "Non-bank financial intermediation in the euro area: implications for monetary policy transmission and key vulnerabilities," Occasional Paper Series 270, European Central Bank.
    12. Feiner Solís, Sara, 2021. "The effectiveness and risks of loose monetary policy under financialisation," IPE Working Papers 159/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    13. Jelena Zivanovic, 2019. "Corporate Debt Composition and Business Cycles," Staff Working Papers 19-5, Bank of Canada.
    14. Brand, Thomas & Tripier, Fabien, 2021. "Risk shocks and divergence between the Euro area and the US in the aftermath of the Great Recession," CEPREMAP Working Papers (Docweb) 2101, CEPREMAP.
    15. Stépahne Lhuissier & Urszula Szczerbowicz, 2018. "Monetary Policy and Corporate Debt Structure," Working papers 697, Banque de France.

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    More about this item

    Keywords

    Corporate Debt; Bonds Markets; Banking; Business Cycles; Recovery; Financial Frictions;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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