Macroeconomic fluctuations and corporate financial fragility.(Report) Bruneau, C; De Bandt, O; Amri, W. El

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Bruneau, C ; De Bandt, O ; Amri, W. El
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Journal of Financial Stability
Financial markets -- Analysis; Corporate finance -- Analysis; Economics
To link to full-text access for this article, visit this link: Byline: C. Bruneau (a), O. de Bandt (b), W. El Amri (a) Abstract: a* It provides evidence of "second round effects" between macroeconomic cycles and changes in financial fragility, as measured at the microeconomic level by corporate bankruptcies. a* The estimation uses the FIBEN database, a very rich accounting database on individual firms in France. a* It is based on the estimation at the sector level of a two equation VAR-type system: the first one explains firms' bankruptcies by financial ratios and macroeconomic variables; the second one the output gap by firms' bankruptcies. Additional macro variables can also be used. a* Given the statistically and economically significant effect of bankruptcies on the output gap, "second round effects" appear quite clearly. a* The paper also identifies a few trade-offs associated with the approach, regarding endogenous defaults, the use of accounting data, the relevance of financial market variables, the identification assumptions in VAR models. Author Affiliation: (a) Banque de France and University of Paris Ouest (EconomiX), France (b) Banque de France-Autorite de Controle Prudentiel, France Article History: Received 29 October 2010; Revised 28 December 2011; Accepted 28 February 2012
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