Macroeconomic Fluctuations and Corporate Financial Fragility

C. Bruneau and Olivier de Bandt ()

Documents de Travail from Banque de France

Abstract: Using a large sample of accounting data for non financial companies in France on the period 1990-2004, the paper studies the interactions between macroeconomic shocks and companies financial fragility. We consider links in both directions, namely whether .rms. bankruptcies are affected by macroeconomic variables, and, conversely, whether bankruptcies determine the business cycle. We estimate forecasting equations for firms' bankruptcy using Schumway’s (2001) approach and study the joint dynamics of defaults and macroeconomic variables, in order to measure the so-called "second round" effects. We illustrate how the model can be used for stress testing.

Keywords: Financial fragility; Macroeconomic Shocks; Corporate Bankruptcies; Duration model, Stress Testing (search for similar items in EconPapers)
JEL-codes: G3 C33 E44 (search for similar items in EconPapers)
Date: 2008
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Persistent link: http://EconPapers.repec.org/RePEc:bfr:banfra:226

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