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Corporate balance sheet adjustment: stylized facts, causes and consequences. Bruegel Working Paper 2012/03, February 2012

Wolff, Guntram B. and Ruscher, Eric (2012) Corporate balance sheet adjustment: stylized facts, causes and consequences. Bruegel Working Paper 2012/03, February 2012. [Working Paper]

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    Abstract

    We analyse corporate balance sheet adjustment episodes in Germany and Japan, as well as a sample of 30 countries, using national account data. Corporate balance sheet adjustment tends to be long lasting and associated with a strong impact on current accounts, wages and investment. Adjustment episodes lead to significant changes in corporate balance sheet ratios with a buildup of liquidity and a reduction of leverage. 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.

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    Item Type: Working Paper
    Subjects for non-EU documents: Countries > Germany
    Countries > Japan
    EU policies and themes > Policies & related activities > economic and financial affairs > business/private economic activity
    EU policies and themes > Policies & related activities > economic and financial affairs > Single Market > capital, goods, services, workers
    EU policies and themes > Policies & related activities > economic and financial affairs > financial crisis 2008-on/reforms/economic governance
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Bruegel (Brussels) > Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 20 Feb 2012 10:05
    Number of Pages: 23
    Last Modified: 20 Feb 2012 10:05
    URI: http://aei.pitt.edu/id/eprint/33608

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