Corporate Sector Vulnerabilities in Ireland

November 8, 2016

Preview Citation

Format: Chicago

Nir Klein. Corporate Sector Vulnerabilities in Ireland, (USA: International Monetary Fund, 2016) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The paper uses both macro- and micro-level data to assess how has the financial health of the Irish non-financial corporate (NFC) sector changed in the post financial crisis period. The analysis suggests that vulnerabilities have generally declined in recent years, but the NFC sector and especially smaller domestic firms remain vulnerable. A sensitivity analysis indicates that a non-extreme shock, which comprises a decline in profitability and an increase in interest rates, is likely to push many firms into a vulnerable state and that the share of firms with interest cover ratio of lower than one would triple to nearly fifty percent, largely reflecting the deterioration in the financial health of small firms. In such a scenario, the share of risky debt would increase to the level observed during the financial crisis, resulting in a significant increase in new corporate defaults.

Subject: Bank credit, Banking, Corporate sector, Economic sectors, Financial crises, Financial institutions, Foreign corporations, Loans, Money

Keywords: Bank credit, Corporate sector, Current ratio, Europe, Financial crisis, Firm, Firm size, Firms' interest cover ratio, Foreign corporations, Global, Interest expense, Interest rate, Interest rate shock, Leverage, Loans, Medium-sized firm, Profit shock, WP

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/211
Stock No:

WPIEA2016211
ISBN:

9781475552171
ISSN:

1018-5941

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