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Stress Testing Corporate Balance Sheets in Emerging Economies
Author:
Mr. Julian T Chow
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Series:
IMF Working Papers
Volume/Issue:
Volume 2015: Issue 216
Language:
English
Publication Date:
30 Sep 2015
DOI:
https://doi.org/10.5089/9781513502717.001
ISBN:
9781513502717
ISSN:
1018-5941
Pages:
18
Keywords:
WP; emerging market; corporate; balance sheet; emerging market corporate; interest expense; Emerging market corporate debt; leverage; debt at risk; balance sheet information; on-balance sheet derivatives obligation; debt issuance; liabilities structure; banking sector; expenses of the corporate; debt index; foreign currency issuance; Emerging and frontier financial markets; Financial statements; Stress testing; Currencies; Corporate sector; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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In recent years, firms in emerging market countries have increased borrowing, particularly in foreign currency, owing to easy access to global capital markets, prolonged low interest rates and good investment opportunities. This paper discusses the trends in emerging market corporate debt and leverage, and illustrates how those firms are vulnerable to interest rate, exchange rate and earnings shocks. The results of a stress test show that while corporate sector risk remains moderate in most emerging economies, a combination of macroeconomic and financial shocks could significantly erode firms’ ability to service debt and lead to higher debt at risk, especially in countries with high shares of foreign currency debt and low natural hedges.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund