Nonfinancial Firms in Latin America: A Source of Vulnerability?

November 29, 2012

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Format: Chicago

Maria Gonzalez. Nonfinancial Firms in Latin America: A Source of Vulnerability?, (USA: International Monetary Fund, 2012) 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

We examine corporate sector vulnerabilities in Brazil, Chile, Colombia, Mexico and Peru. First, we identify stylized facts based on corporate financial indicators. Second, we assess vulnerability of individual firms to a sudden stop in financing through a probit model, using a panel of 18 countries in 2000-11. Results suggest that higher leverage and maturity exposures raise a firm’s probability to become exposed to a funding shock, while a larger firm size and buffers reduce it. Further, greater exchange rate flexibility can help mitigate corporate vulnerability. Identification of firms at risk through the model suggests that some vulnerabilities may be building in Latin America led by leverage, currency exposures and moderating buffers. These effects are partially offset, however, by a significant reduction in maturity exposures.

Subject: Balance of payments, Corporate sector, Currencies, Economic sectors, Exchange rate flexibility, Foreign currency exposure, Foreign exchange, Money, Sudden stops

Keywords: Asia and Pacific, Asset, Cash flow, Corporate sector, Currencies, Debt, Debt Structure, Exchange rate flexibility, External Vulnerability, Firm, Firm-level indicators, Foreign currency exposure, Global, Global Shocks, Latin America, Leverage, Leverage burden, Nonfinancial firm, Probability of exposure, Short term, Sudden stops, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/279
Stock No:

WPIEA2012279
ISBN:

9781475513486
ISSN:

1018-5941

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