Which Emerging Markets and Developing Economies Face Corporate Balance Sheet Vulnerabilities? : A Novel Monitoring Framework
This paper introduces a novel corporate financial vulnerability index that tracks financial conditions of the non-financial corporate sector. Using the balance sheet information of 14,207 listed non-financial firms in 69 emerging markets and develo...
| Main Authors: | , , , |
|---|---|
| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/414901505845252068/Which-emerging-markets-and-developing-economies-face-corporate-balance-sheet-vulnerabilities-a-novel-monitoring-framework http://hdl.handle.net/10986/28376 |
| Summary: | This paper introduces a novel corporate
financial vulnerability index that tracks financial
conditions of the non-financial corporate sector. Using the
balance sheet information of 14,207 listed non-financial
firms in 69 emerging markets and developing economies, the
index shows that, at the global level, corporate
vulnerability sharply increased since 2013 and stabilized in
2016. Regional trends are more heterogeneous, pointing to
significant corporate vulnerabilities in Eastern Europe and
Central Asia, as well as a deterioration of firms'
financial conditions in Latin America, the Middle East and
North Africa, and Sub-Saharan Africa in recent years. The
energy sector has exhibited the fastest deterioration,
especially since 2014, in part driven by the decline in oil
prices. However, if currently relatively benign global
funding conditions and higher commodity prices endure,
companies may have an opportunity to strengthen their
balance sheets. The paper also finds that the index has
leading indicator properties for socioeconomic outcomes,
such as a rise in unemployment and an economic recession,
and outperforms a commonly used "debt at risk" approach. |
|---|