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Modelling Italian firms� financial vulnerability

Author

Listed:
  • Andonio De Socio

    (Banca d'Italia)

  • Valentina Michelangeli

    (Banca d'Italia)

Abstract

We develop a model to assess the evolution of the Italian corporate sector�s financial vulnerability. We use micro data to take into account the heterogeneity of firms and their demography and we integrate them with macroeconomic forecasts in order to estimate EBITDA, interest expense and financial debt for each individual firm over a two-year horizon. In this way we obtain a projection of the share of vulnerable firms (those with negative EBITDA or whose interest expense-to-EBITDA ratio is above 50 per cent) and of their debt well in advance of the availability of actual data. By applying the model to the 2013 individual firm data (available only in early 2015), we estimate an increase in the share of vulnerable firms in 2014, followed by a sizeable decrease in 2015, mainly due to the reduction in interest rates and the economic recovery. The model is then used to evaluate stress scenarios for interest rates and profitability.

Suggested Citation

  • Andonio De Socio & Valentina Michelangeli, 2015. "Modelling Italian firms� financial vulnerability," Questioni di Economia e Finanza (Occasional Papers) 293, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_293_15
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2015-0293/QEF_293_15.pdf
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    References listed on IDEAS

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    1. Hovick Shahnazarian, 2011. "A dynamic micro-econometric simulation model for firms," International Journal of Microsimulation, International Microsimulation Association, vol. 4(1), pages 2-20.
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    Cited by:

    1. Giordano, Claire & Marinucci, Marco & Silvestrini, Andrea, 2019. "The macro determinants of firms' and households' investment: Evidence from Italy," Economic Modelling, Elsevier, vol. 78(C), pages 118-133.
    2. Bank for International Settlements, 2016. "Experiences with the ex ante appraisal of macroprudential instruments," CGFS Papers, Bank for International Settlements, number 56.
    3. De Socio, Antonio & Michelangeli, Valentina, 2017. "A model to assess the financial vulnerability of Italian firms," Journal of Policy Modeling, Elsevier, vol. 39(1), pages 147-168.

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    1. De Socio, Antonio & Michelangeli, Valentina, 2017. "A model to assess the financial vulnerability of Italian firms," Journal of Policy Modeling, Elsevier, vol. 39(1), pages 147-168.

    More about this item

    Keywords

    firms� vulnerability; debt; stress test;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • 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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