Stress Testing and Corporate Finance

Olivier de Bandt, C. Bruneau and Wydad El Amri

Working papers from Banque de France

Abstract: The article contributes to the literature on financial fragility, studying how macro-economic shocks affect supply and demand in the corporate debt market. We take into account the effect of the competitive environment, as well as the risk level, measured by companies' default rate. The model is estimated using data from the Harmonised BACH database of corporate accounts for large euro area countries on the 1993-2005 period, in order to carry out an illustrative stress testing exercise. We measure the impact of large macroeconomic shocks (a severe recession and a sharp increase in oil prices) on the equilibrium in the debt market.

Keywords: Corporate Finance; Debt; Financial Fragility; Stress Tests; Panel Data. (search for similar items in EconPapers)
JEL-codes: C33 E44 G3 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2008
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Citations: View citations in EconPapers (6)

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Journal Article: Stress testing and corporate finance (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:203

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