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

By Manuel De la Rocha, Roberto Perrelli, Christian B. Mulder

March 1, 2002

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Manuel De la Rocha, Roberto Perrelli, and Christian B. Mulder The Role of Corporate, Legal and Macroeconomic Balance Sheet Indicators in Crisis Detection and Prevention, (USA: International Monetary Fund, 2002) accessed September 19, 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

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.

Subject: Commercial banks, Corporate sector, Economic sectors, Financial crises, Financial institutions, Financial statements, Legal support in revenue administration, Public financial management (PFM), Revenue administration

Keywords: Africa, Balance sheet effect, Balance Sheet Effects, Balance sheet factor, Balance sheet indicator, Balance sheet variable, Balance sheets explanation, Banking sector, Book value, Cash flow, Commercial banks, Corporate Sector, Crisis probability, Currency Crises, External Vulnerability, Financial statements, Financial structure, Legal support in revenue administration, Macroeconomic balance sheet, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/059
Stock No:

WPIEA0592002
ISBN:

9781451847956
ISSN:

1018-5941

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