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Business and Economics > Investments: Stocks

You are looking at 1 - 4 of 4 items for :

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Cover IMF Working Papers
Assessing Default Risks for Chinese Firms: A Lost Cause?
Daniel Law
and
Mr. Shaun K. Roache
Assessing default risks for Chinese firms is hard. Standard measures of risk using market indicators may be unreliable because of implicit guarantees, the large role played by less-informed investors, and other market imperfections. We test this assertion by estimating stand-alone 1-year default probabilities for non-financial firms in China using an equity-based structural model and debt costs. We find evidence that the equity measure of default risk is sensitive to a firm’s balance sheet health, profitability, and ownership; specifically, default probabilities are higher for weaker, less profitable, and state-owned firms. In contrast, measures based on the cost of debt seem largely detached from fundamentals and instead determined by implicit guarantees. We conclude that for individual firms, equity-based measures, while far from perfect, provide a better measure of stand-alone default risks than borrowing costs.
Keywords:
WP; default probability; book value; growth industry; current liabilities; macroeconomic variable; equity market data; A-rated firm; firm default; Asset valuation; Debt default; Credit ratings; Credit risk; Stocks; Global; North America
Cover IMF Staff Country Reports
United States: Financial Sector Assessment Program-Detailed Assessment of Implementation on the IOSCO Objectives and Principles of Securities Regulation
International Monetary Fund. Monetary and Capital Markets Department
This paper discusses key findings of the Detailed Assessment of Implementation of the IOSCO (International Organization of Securities Commissions) Objectives and Principles of Securities Regulation on the United States. The United States has large, well-developed, and complex securities and derivatives markets. Postcrisis, the legal mandates of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have significantly expanded. The level of funding of both the SEC and CFTC is a key challenge affecting their ability to deliver on their mandates in a way that provides confidence to markets and investors. The fragmented structure of equity markets remains a key challenge for the SEC.
Keywords:
ISCR; CR; CFTC regulation; SEC staff; futures contract; business model; certificate of incorporation; net capital; investment strategy; insider trading; SEC rule; open-end fund; audit program; secondary market; Securities; Credit ratings; Auditing; Stocks; Securities regulation; Global
Cover Global Financial Stability Report, October 2010
Global Financial Stability Report, October 2010
Sovereigns, Funding, and Systemic Liquidity
International Monetary Fund. Monetary and Capital Markets Department

Abstract

The global financial system is still in a period of significant uncertainty. Although the ongoing recovery is expected to gradual strengthen balance sheets, progress toward stability has experienced a setback since the April 2010 GFSR. As discussed in this October 2010 report, policymakers in many advanced countries need to confront the interactions created by slow growth, rising sovereign indebtedness, and still fragile financial institutions by addressing legacy problems in the banking system, strengthening the fundamentals of sovereign and bank balance sheets, and clarifying regulatory reforms.

Keywords:
GFSR; market; financial institution; bank; effect; securities; cliff effect; market infrastructure; rating agency; securities lender; return on equity; Credit ratings; Commercial banks; Emerging and frontier financial markets; Credit; Loans; Global; Europe; Africa; Middle East; Asia and Pacific; rating change; liquidity risk; repo market; IMF staff estimate; funding market; commercial paper; Liquidity risk; Credit default swap; Liquidity; Central and Eastern Europe; Caribbean
Cover IMF Working Papers
Signaling Fiscal Regime Sustainability
Mr. Alessandro Prati
and
Francesco Drudi
This paper proposes a signaling model that offers a new perspective on why governments deviate from optimal tax smoothing and delay debt stabilization. In our model, dependable—but not fully credible—governments have an incentive to tighten the fiscal regime when the signaling effect on credit ratings is larger (that is, when a sufficiently large stock of debt has been accumulated). At this point, they may deviate from tax smoothing not to be mimicked by weak governments. The model predicts that primary balances and debt stocks are complementary inputs in the credit rating function as tests on Italian, Irish, Belgian, and Danish data show.
Keywords:
WP; debt stock; monetary policy; mover accent; signaling; fiscal stabilization; tax smoothing; debt sustainability; credit ratings; debt financing cost; debt level; debt maturing; rating function; debt accumulation; stock of debt; Fiscal stance; Stocks; Global; equilibrium existence; signaling model; Balance-to-GDP ratio; pooling equilibrium