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Measuring Non-Financial Corporate Sector Vulnerabilities in Canada

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Listed:
  • Timothy Grieder
  • Claire Schaffter

Abstract

In this note, we use firm-level data from Statistics Canada’s Quarterly Survey of Financial Statements to construct two sets of aggregate vulnerability indicators for the non-financial corporate sector in Canada. First, we measure debt at risk by tracking the share of outstanding debt associated with firms that are not generating enough income or have limited assets to make debt and interest payments. Second, we construct time-series measures of borrower quality by comparing the average credit quality of firms that have the largest increases in debt normalized by lagged total assets with those that have the smallest increases. Our results show that debt-at-risk has been above historical averages in recent years due to developments in some sectors that are related to commodities. We do not find evidence of a broad-based deterioration in borrower quality in recent years.

Suggested Citation

  • Timothy Grieder & Claire Schaffter, 2019. "Measuring Non-Financial Corporate Sector Vulnerabilities in Canada," Staff Analytical Notes 2019-15, Bank of Canada.
    • Handle: RePEc:bca:bocsan:19-15
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    References listed on IDEAS

    as
    1. Gryglewicz, Sebastian, 2011. "A theory of corporate financial decisions with liquidity and solvency concerns," Journal of Financial Economics, Elsevier, vol. 99(2), pages 365-384, February.
    2. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    3. Timothy Grieder & Michal Lipsitz, 2018. "Measuring Vulnerabilities in the Non-Financial Corporate Sector Using Industry- and Firm-Level Data," Staff Analytical Notes 2018-17, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Business fluctuations and cycles; Credit and credit aggregates; Financial stability; Monetary and financial indicators; Recent economic and financial developments; Sectoral balance sheet;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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