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Growth of Global Corporate Debt : Main Facts and Policy Challenges (English)

This paper surveys the literature to document the main stylized facts, risks, and policy challenges related to the expansion of global nonfinancial corporate debt after the 2008–09 global financial crisis. Nonfinancial corporate debt steadily increased after the crisis, especially in emerging economies. Between 2008 and 2018, corporate debt increased from 56 to 96 percent of gross domestic product in emerging economies, whereas this ratio remained stable in developed economies. Nonfinancial corporate debt was mainly issued through bond markets, and its growth can be largely attributed to accommodative monetary policies in developed economies. Whereas increased debt financing has some positive aspects, it has also amplified firms' solvency risks and exposure to changes in market conditions, such as the economic downturn triggered by the COVID-19 pandemic. Because capital markets have a larger role in firm financing, policy makers have limited tools to mitigate the risks of growing firm debt.

Details

  • Author

    Abraham,Facundo, Cortina Lorente,Juan Jose, Schmukler,Sergio L.

  • Document Date

    2020/09/10

  • Document Type

    Policy Research Working Paper

  • Report Number

    WPS9394

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    World,

  • Region

    The World Region,

  • Disclosure Date

    2020/09/10

  • Disclosure Status

    Disclosed

  • Doc Name

    Growth of Global Corporate Debt : Main Facts and Policy Challenges

  • Keywords

    Emerging economies; emerging economy; development research group; access to international financial market; changes in market condition; percentage point decline; exposure to currency risk; liquidity in bond market; central banks and banking; lender of last resort; access to bond market; share of debt; low interest rate; foreign currency debt; debt service capacity; global financial crisis; reliance on bond; corporate bond; international bond market; corporate bond issue; corporate bond issuance; amount of debt; local bond market; ratio of debt; corporate sector; global interest rates; foreign currency liability; firm going bankrupt; domestic bond market; domestic corporate bond; high default risk; corporate bond market; high growth rate; international financial conditions; event of default; exchange rate depreciation; value of debt; risk of default; private equity fund; relatively high rate; corporate debt market; long-term economic growth; emerging market bond; share of investment; emerging market debt; interest rate decline; interest rate differential; declining interest rates; return on asset; corporate bond financing; foreign investor participation; interest coverage ratio; earnings before interest; asian financial crisis; higher interest payments; capital market crisis; central bank financing; asset management companies; Corporate Debt Restructuring; implicit government guarantee; traditional banking system; impact investment; access to finance; amount of fund; competitive financial market; effective insolvency law; pension fund investment; debt over equity; international financial institution; central bank facility; financial risk management; asset management company; domestic currencies; corporate distress; Financial Sector; global debt; debt level; monetary policy; capital control; financial distress; sovereign debt; debt repayment; banking sector; debt finance; negative effect

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Citation

Abraham,Facundo Cortina Lorente,Juan Jose Schmukler,Sergio L.

Growth of Global Corporate Debt : Main Facts and Policy Challenges (English). Policy Research working paper,no. WPS 9394,COVID-19 (Coronavirus) Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/570381599749598347/Growth-of-Global-Corporate-Debt-Main-Facts-and-Policy-Challenges