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Corporate Debt: Where is the Danger?

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  • Saeidinezhad, Elham

Abstract

This paper will attempt to take a first step toward building a granular framework by examining the sustainability of American corporate debt through the sustainability analysis of nonfinancial corporate sectors. This approach does not displace but rather complements traditional measures used by analysts that rely on aggregated and netted metrics. By examining sectoral debt composition based on both dimensions of corporate indebtedness, a mixed picture emerges. While some sectors show more resiliency to a downturn than standard analysis implies, other sectors, particularly within the utilities sector, show far greater exposure to profitability and interest rate shocks than commonly understood. It is important to note that while this paper evaluates the liquidity of non-financial corporate debt sectors in response to adverse events, it does not examine the ultimate holders of this debt and their liquidity requirements. Therefore, it does not provide us with a complete picture of the systemic vulnerabilities presented by these instruments.

Suggested Citation

  • Saeidinezhad, Elham, 2019. "Corporate Debt: Where is the Danger?," MPRA Paper 98547, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:98547
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    File URL: https://mpra.ub.uni-muenchen.de/98547/1/MPRA_paper_98547.pdf
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    More about this item

    Keywords

    corporate debt; leverage; liquid assets; debt repayment capacity;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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