Sovereign debt crises and credit to the private sector

“…Arteta and Hale (2008) find that sovereign debt crisis and its aftermath influence the foreign credit availability to private sector. They argue that there is 20% decline of foreign credit to emerging market private companies during debt renegotiation.…”

Section: Government Debt and Corporate Performancementioning

confidence: 93%

“…As it was mentioned before government debt is associated with a tax raise. At high debt levels, the expected future tax increase might reduce the possible positive effects of government debt, decreasing investment and consumption resulting in less employment and lower output growth (Arteta and Hale 2008). Earlier Kumar and Woo (2010) find an inverse relation between debt and subsequent growth in advanced and emerging economies.…”

Section: Sovereign Debt In a Nutshellmentioning

confidence: 96%

Sovereign Debt and Corporate Capital Structure: The Evidence From Selected European Countries During the Gglobal Financial and Economic Crisis

Mokhova¹,

Zinecker

2017

Business: Theory and Practice

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The recent Global financial crisis and the following European debt crisis show the significance of country financial stability and its impact on the private sector. Moreover, the sovereign debt as an essential element of government macroeconomic policy influences the financial performances of the companies and their future development and growth. The capital structure and financing decisions represent one of the most significant parts of company’s financial policy and its key to financial strength. There are a lot of external factors influencing the capital structure; however, due to the European debt crisis the aim of this study is to indicate the influence of sovereign debt on capital structure of the private held companies in different European countries. This study examines the evidence from European developed countries and emerging markets for the period 2005–2012, in order to compare the level of its impact on the capital structure according to the countries’ specifics. We find that after Global Financial Crisis the sovereign debt has tendency to increase in all investigated countries. Greece and Italy have the highest level of debt and it exceeds their Gross Domestic Product (GDP). In addition to that, the Czech Republic has the lowest level of sovereign debt to GDP, but at the same time the corporate capital structure exceeds 100%. The sovereign debt levels are strongly and statistically significantly correlated with each other, however, Hungarian debt has weaker relation with other countries. The findings also show the integration and interdependence of European countries. Moreover, Hungarian, Czech and German private sectors are the most depended on the level of sovereign debt.

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“…This heightened risk drives up the cost of private external debt or lowers the willingness of external lenders to supply funds to the private sector, leading to what the authors call a ‘crowding out of private access’ to international markets. There is also empirical evidence that sovereign debt defaults significantly decrease the volume of corporate borrowing from abroad (Arteta and Hale , Das et al ).…”

Section: The Link Between Public and Private Debts – Theoretical Consmentioning

confidence: 99%

The Interplay Between Public and Private External Debt Stocks

Brzozowski

Siwińska-Gorzelak

2016

International Finance

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Using a sample of 48 emerging and developing countries in the 1970–2012 period, we investigated the interactions between the stock of sovereign debt and the quantity of corporate external borrowing. We found that public external debt hinders private‐sector access to external loan and bond markets. By contrast, the stock of private debt in international financial markets exerts a positive influence on public external debt from all sources except other private creditors. We also found the incidence of bank crises, capital account openness and the rate of economic growth to be among the macroeconomic variables that have a significant impact on both public and private external debts.

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Sovereign debt crises and credit to the private sector

Cited by 225 publications

References 27 publications

The Market Impact of Relative Agency Activity in the Sovereign Ratings Market

The Market Impact of Relative Agency Activity in the Sovereign Ratings Market

Sovereign Debt and Corporate Capital Structure: The Evidence From Selected European Countries During the Gglobal Financial and Economic Crisis

The Interplay Between Public and Private External Debt Stocks

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