Corporate Risk around the World
Weaknesses in the corporate sector have increasingly been cited as important factors in financial crises in both emerging markets and industrial countries. Analysts have pointed to weak corporate performance and risky financing patterns as major ca...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2000/01/438992/corporate-risk-around-world http://hdl.handle.net/10986/19855 |
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okr-10986-19855 |
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oai_dc |
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Digital Repository |
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Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
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English en_US |
| topic |
ACCOUNTING AGENCY PROBLEMS ASYMMETRIC INFORMATION BALANCE SHEET BANKING SYSTEM BANKRUPTCY BANKRUPTCY PROCEEDINGS BOOK VALUE CAPITAL FLOWS CAPITAL GAINS CAPITAL MARKETS CAPITALIZATION CASH FLOW CASH FLOWS CONTRACT ENFORCEMENT CORPORATE FINANCE CORPORATE GOVERNANCE COUNTRY COMPARISONS CREDIT RISK CREDITOR CURRENT ASSETS DEBT DEBT FINANCING DEBTOR DEVELOPED COUNTRIES DIVIDENDS ECONOMIC GROWTH ECONOMIC RESEARCH EMERGING MARKETS EMPIRICAL EVIDENCE EMPIRICAL INVESTIGATIONS EMPLOYMENT EQUITY MARKETS EXCHANGE RATES FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL LEVERAGE FINANCIAL LEVERAGE RATIOS FINANCIAL MARKETS FINANCIAL RISK FINANCIAL RISKS FINANCIAL SECTOR FINANCIAL STRUCTURE FINANCIAL STRUCTURES FINANCIAL SYSTEMS GDP GDP DEFLATOR GNP GNP PER CAPITA INFLATION INTEREST COVERAGE RATIO INTEREST RATE INVENTORIES INVENTORY LAWS LEGAL FRAMEWORK LEGAL PROTECTION LIQUIDITY MACROECONOMIC POLICIES MARKET VALUE MORAL HAZARD NET WORKING CAPITAL OPERATING INCOME OPERATING LEVERAGE OPERATIONAL RISKS PROFITABILITY PROFITABILITY MEASURES PROPERTY RIGHTS QUICK RATIO REGRESSION ANALYSIS REORGANIZATION RETURN ON ASSETS RETURN ON EQUITY RETURN ON INVESTMENT RISK TRANSFER SAVINGS SHAREHOLDERS SHORT TERM DEBT STOCK MARKETS TAX RATES TIME SERIES TRANSITION ECONOMIES VALUATION WAGES |
| spellingShingle |
ACCOUNTING AGENCY PROBLEMS ASYMMETRIC INFORMATION BALANCE SHEET BANKING SYSTEM BANKRUPTCY BANKRUPTCY PROCEEDINGS BOOK VALUE CAPITAL FLOWS CAPITAL GAINS CAPITAL MARKETS CAPITALIZATION CASH FLOW CASH FLOWS CONTRACT ENFORCEMENT CORPORATE FINANCE CORPORATE GOVERNANCE COUNTRY COMPARISONS CREDIT RISK CREDITOR CURRENT ASSETS DEBT DEBT FINANCING DEBTOR DEVELOPED COUNTRIES DIVIDENDS ECONOMIC GROWTH ECONOMIC RESEARCH EMERGING MARKETS EMPIRICAL EVIDENCE EMPIRICAL INVESTIGATIONS EMPLOYMENT EQUITY MARKETS EXCHANGE RATES FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL LEVERAGE FINANCIAL LEVERAGE RATIOS FINANCIAL MARKETS FINANCIAL RISK FINANCIAL RISKS FINANCIAL SECTOR FINANCIAL STRUCTURE FINANCIAL STRUCTURES FINANCIAL SYSTEMS GDP GDP DEFLATOR GNP GNP PER CAPITA INFLATION INTEREST COVERAGE RATIO INTEREST RATE INVENTORIES INVENTORY LAWS LEGAL FRAMEWORK LEGAL PROTECTION LIQUIDITY MACROECONOMIC POLICIES MARKET VALUE MORAL HAZARD NET WORKING CAPITAL OPERATING INCOME OPERATING LEVERAGE OPERATIONAL RISKS PROFITABILITY PROFITABILITY MEASURES PROPERTY RIGHTS QUICK RATIO REGRESSION ANALYSIS REORGANIZATION RETURN ON ASSETS RETURN ON EQUITY RETURN ON INVESTMENT RISK TRANSFER SAVINGS SHAREHOLDERS SHORT TERM DEBT STOCK MARKETS TAX RATES TIME SERIES TRANSITION ECONOMIES VALUATION WAGES Claessens, Stijn Djankov, Simeon Nenova, Tatiana Corporate Risk around the World |
| relation |
Policy Research Working Paper;No. 2271 |
| description |
Weaknesses in the corporate sector have
increasingly been cited as important factors in financial
crises in both emerging markets and industrial countries.
Analysts have pointed to weak corporate performance and
risky financing patterns as major causes of the East Asian
financial crisis. And some have argued that company balance
sheet problems may also have played a role, independent of
macroeconomic or other weaknesses, including poor corporate
sector performance. But little is known about the empirical
importance of firm financing choices in predicting and
explaining financial instability. Firm financing patterns
have long been studied by the corporate finance literature.
Financing patterns have traditionally been analyzed in the
Modigliani-Miller framework, expanded to incorporate taxes
and bankruptcy costs. More recently, asymmetric information
issues have drawn attention to agency costs and their impact
on firm financing choices. There is also an important
literature relating financing patterns to firm performance
and governance. Several recent studies have focused on
identifying systematic cross-country differences in firm
financing patterns - and the effects of these differences on
financial sector development and economic growth. They have
also examined the causes of different financing patterns,
particularly countries' legal and institutional
environments. The literature has devoted little attention to
corporate sector risk characteristics, however, aside from
leverage and debt maturity considerations. Even these
measures have been the subject of few empirical
investigations, mainly because of a paucity of data on
corporate sectors around the world. Building on data that
have recently become available, the authors try to fill this
gap in the literature and shed light on the risk
characteristics of corporate sectors around the world. They
investigate how corporate sectors' financial and
operating structures relate to the institutional environment
in which they operate, using data for more than 11,000 firms
in 46 countries. They show that: 1) the origins of a
country's laws, the strength of its equity and creditor
rights, and the nature of its financial system can account
for the degree of corporate risk-taking. 2) In particular,
corporations in common law countries and market-based
financial systems have less risky financing patterns. 3)
Stronger protection of equity and creditor rights is also
associated with less financial risk. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Claessens, Stijn Djankov, Simeon Nenova, Tatiana |
| author_facet |
Claessens, Stijn Djankov, Simeon Nenova, Tatiana |
| author_sort |
Claessens, Stijn |
| title |
Corporate Risk around the World |
| title_short |
Corporate Risk around the World |
| title_full |
Corporate Risk around the World |
| title_fullStr |
Corporate Risk around the World |
| title_full_unstemmed |
Corporate Risk around the World |
| title_sort |
corporate risk around the world |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2000/01/438992/corporate-risk-around-world http://hdl.handle.net/10986/19855 |
| _version_ |
1764441684977909760 |
| spelling |
okr-10986-198552021-04-23T14:03:47Z Corporate Risk around the World Claessens, Stijn Djankov, Simeon Nenova, Tatiana ACCOUNTING AGENCY PROBLEMS ASYMMETRIC INFORMATION BALANCE SHEET BANKING SYSTEM BANKRUPTCY BANKRUPTCY PROCEEDINGS BOOK VALUE CAPITAL FLOWS CAPITAL GAINS CAPITAL MARKETS CAPITALIZATION CASH FLOW CASH FLOWS CONTRACT ENFORCEMENT CORPORATE FINANCE CORPORATE GOVERNANCE COUNTRY COMPARISONS CREDIT RISK CREDITOR CURRENT ASSETS DEBT DEBT FINANCING DEBTOR DEVELOPED COUNTRIES DIVIDENDS ECONOMIC GROWTH ECONOMIC RESEARCH EMERGING MARKETS EMPIRICAL EVIDENCE EMPIRICAL INVESTIGATIONS EMPLOYMENT EQUITY MARKETS EXCHANGE RATES FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL LEVERAGE FINANCIAL LEVERAGE RATIOS FINANCIAL MARKETS FINANCIAL RISK FINANCIAL RISKS FINANCIAL SECTOR FINANCIAL STRUCTURE FINANCIAL STRUCTURES FINANCIAL SYSTEMS GDP GDP DEFLATOR GNP GNP PER CAPITA INFLATION INTEREST COVERAGE RATIO INTEREST RATE INVENTORIES INVENTORY LAWS LEGAL FRAMEWORK LEGAL PROTECTION LIQUIDITY MACROECONOMIC POLICIES MARKET VALUE MORAL HAZARD NET WORKING CAPITAL OPERATING INCOME OPERATING LEVERAGE OPERATIONAL RISKS PROFITABILITY PROFITABILITY MEASURES PROPERTY RIGHTS QUICK RATIO REGRESSION ANALYSIS REORGANIZATION RETURN ON ASSETS RETURN ON EQUITY RETURN ON INVESTMENT RISK TRANSFER SAVINGS SHAREHOLDERS SHORT TERM DEBT STOCK MARKETS TAX RATES TIME SERIES TRANSITION ECONOMIES VALUATION WAGES Weaknesses in the corporate sector have increasingly been cited as important factors in financial crises in both emerging markets and industrial countries. Analysts have pointed to weak corporate performance and risky financing patterns as major causes of the East Asian financial crisis. And some have argued that company balance sheet problems may also have played a role, independent of macroeconomic or other weaknesses, including poor corporate sector performance. But little is known about the empirical importance of firm financing choices in predicting and explaining financial instability. Firm financing patterns have long been studied by the corporate finance literature. Financing patterns have traditionally been analyzed in the Modigliani-Miller framework, expanded to incorporate taxes and bankruptcy costs. More recently, asymmetric information issues have drawn attention to agency costs and their impact on firm financing choices. There is also an important literature relating financing patterns to firm performance and governance. Several recent studies have focused on identifying systematic cross-country differences in firm financing patterns - and the effects of these differences on financial sector development and economic growth. They have also examined the causes of different financing patterns, particularly countries' legal and institutional environments. The literature has devoted little attention to corporate sector risk characteristics, however, aside from leverage and debt maturity considerations. Even these measures have been the subject of few empirical investigations, mainly because of a paucity of data on corporate sectors around the world. Building on data that have recently become available, the authors try to fill this gap in the literature and shed light on the risk characteristics of corporate sectors around the world. They investigate how corporate sectors' financial and operating structures relate to the institutional environment in which they operate, using data for more than 11,000 firms in 46 countries. They show that: 1) the origins of a country's laws, the strength of its equity and creditor rights, and the nature of its financial system can account for the degree of corporate risk-taking. 2) In particular, corporations in common law countries and market-based financial systems have less risky financing patterns. 3) Stronger protection of equity and creditor rights is also associated with less financial risk. 2014-08-28T19:49:00Z 2014-08-28T19:49:00Z 2000-01 http://documents.worldbank.org/curated/en/2000/01/438992/corporate-risk-around-world http://hdl.handle.net/10986/19855 English en_US Policy Research Working Paper;No. 2271 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |