Stress Testing Corporate Balance Sheets in Emerging Economies

September 30, 2015

Preview Citation

Format: Chicago

Julian T Chow. Stress Testing Corporate Balance Sheets in Emerging Economies, (USA: International Monetary Fund, 2015) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Corporate sector, Currencies, Economic sectors, Emerging and frontier financial markets, Financial markets, Financial sector policy and analysis, Financial statements, Money, Public financial management (PFM), Stress testing

Keywords: Balance sheet, Balance sheet information, Banking sector, Corporate, Corporate sector, Currencies, Debt at risk, Debt index, Debt issuance, Emerging and frontier financial markets, Emerging market, Emerging market corporate, Emerging market corporate debt, Expenses of the corporate, Financial statements, Foreign currency issuance, Global, Interest expense, Leverage, Liabilities structure, On-balance sheet derivatives obligation, Stress testing, WP

Publication Details

Pages:

18
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/216
Stock No:

WPIEA2015216
ISBN:

9781513502717
ISSN:

1018-5941

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