Capital Markets: Financing Business Over the Long Term

John E. Silvia ()

Chapter Chapter 6 in Financial Markets and Economic Performance, 2021, pp 215-250 from Springer

Abstract: Abstract New financial instruments emerge, are tested, appear dead, only to reappear in a more sustainable form. Both commercial paper and high yield bonds are examples as finance evolves with the economy. The worst loans are made in the best of times. There is a procyclical pattern to both the supply and demand for bonds but when an economic shock happens, the viability of corporate debt and financial innovations is tested. When examining the evidence of corporate balance sheets, there are distinct cyclical and structural patterns in financial benchmarks such as the corporate short-term to long-term debt ratio and the ratio of corporate debt to equity. The distinction between ex ante and ex post returns brings in the all-important role of expectations and cognitive biases. This emphasizes the linkage between interest rates, exchange rates, and sovereign risk in the U.S. context.

Keywords: High yield; Panic of 1873; Debt to equity ratio; Interest coverage ratio; Short-term debt to total debt ratio; Ex-ante; Ex-post; Financing Gap (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-76295-7_6

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DOI: 10.1007/978-3-030-76295-7_6

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