Corporate balance sheet adjustment: stylized facts, causes and consequences

Eric Ruscher and Guntram Wolff

No 449, European Economy - Economic Papers 2008 - 2015 from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: Using national account data, we define corporate balance sheet adjustment episodes as periods during which major increases in non-financial corporations' net lending/borrowing are experienced. An analysis of such episodes in Germany and Japan, and a more systematic exploration of a sample of 30 countries, show that corporate balance sheet adjustment tends to be long lasting and associated with significant effects on current accounts, wages and investment. The adjustment is generally achieved by reducing investment and increasing savings on the back of a falling wage share. A panel econometric exercise shows that balance sheet adjustment periods are triggered by macroeconomic downturns as well as balance sheet stress due to high debt, low liquidity and negative equity price shocks.

JEL-codes: E62 H20 H30 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-02
New Economics Papers: this item is included in nep-bec, nep-eur and nep-mac
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Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Corporate Balance Sheet Adjustment: Stylized Facts, Causes and Consequences (2013)
Working Paper: Corporate balance sheet adjustment- stylized facts, causes and consequences (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecopap:0449

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