Jones, M.T. and M. Karasulu, 2006, “The Korean Crisis: What Did We Know and When Did We Know It? What Stress Test of the Corporate Sector Reveal,” IMF Working Paper WP/06/114 (Washington: International Monetary Fund).
Moody’s, 2004, “MOODY’S KMV™ RISKCALC™ V3.1 UNITED STATES,” June 1. Available at: http://www.moodysanalytics.com/~/media/Insight/Quantitative-Research/Default-and-Recovery/04-01-06-RiskCalc-v3-1-US.ashx.
Oura, H., 2008, “Financial Development and Growth in India: A Growing Tiger in a Cage?,” IMF Working Paper WP/08/79 (Washington: International Monetary Fund).
Oura, H. and P. Topalova, 2009, “India’s Corporate Sector: Coping with the Global Financial Tsunami,” India: Selected Issues, IMF Country Report No. 09/186 (Washington: International Monetary Fund).
Prepared by Peter Lindner (MCM).
Oura (2008) provides an in-depth discussion of Indian corporates’ financial structure before the GFC.
Moody’s KMV is a model of default risk based on the Black-Scholes-Merton model, incorporating balance sheet and equity market data. See Moody’s (2004).
The approach here is based on Oura and Topalova (2009). Comparing the 2007/08 results here with theirs, we find that our baseline is far lower, but also that the increase in the case where an identical shock is used—25 percent decline in profitability—leads to a lower increase in the share of stressed firms. The main reason for this is likely our use of EBITDA rather than EBIT in the definition of ICR, as well as differing samples.