The Role of Corporate, Legal and Macroeconomic Balance Sheet Indicators in Crisis Detection and Prevention

Manuel De la Rocha, Roberto Perrelli and Christian Mulder ()

No 2002/059, IMF Working Papers from International Monetary Fund

Abstract: This study tests the recent balance sheet explanations of external crises in emerging market countries and the role of standards in these crises. Using several unique data sets, it finds that corporate sector balance sheets have a very significant impact on both the likelihood and depth of external crises. The indicators supplement, rather than substitute for traditional macroeconomic variables with standards playing potentially an important role. The results have implications for strategies to limit external vulnerability: they suggest that policymakers need to promote sound private sector financial structures, support sound shareholder rights, in addition to employing prudent macroeconomic policies to reduce exposure to crises. In sample predictions point to potentially large improvements in the predictive power of models that include these indicators.

Keywords: WP; financial structure; balance sheet indicator; banking sector; balance sheet variable; crisis probability; External Vulnerability; Currency Crises; Balance Sheet Effects; Corporate Sector; balance sheets explanation; book value; balance sheet effect; macroeconomic balance sheet; cash flow; balance sheet factor; Financial statements; Legal support in revenue administration; Commercial banks; Africa (search for similar items in EconPapers)
Pages: 27
Date: 2002-03-01
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Citations: View citations in EconPapers (38)

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