Tax Loss Carrybacks as Firm Fiscal Stimulus: A Tale of Two Recessions

2021 ◽  
Author(s):  
Christine Dobridge
Keyword(s):  
Credit Rating ◽  
Cash Holdings ◽  
Financial Health ◽  
Fiscal Stimulus ◽  
Bankruptcy Risk ◽  
Macroeconomic Conditions ◽  
Financial Conditions ◽  
Tax Refunds ◽  
Tax Loss ◽  
Rating Downgrades

This paper studies effects of the five-year net operating loss carryback enacted near the end of the 2001 and 2007-09 U.S. recessions-a policy that gave firms larger U.S. federal tax refunds as a fiscal stimulus measure. Following the end of the 2001 recession, I find the policy had little effect on firm financial conditions and I find that firms allocated $0.40 of every refund dollar to investment in that period. In contrast, the policy improved firm financial conditions following the 2007-09 recession, reducing bankruptcy risk and the probability of future credit-rating downgrades. In this period, I find that firms initially used the refunds to increase cash holdings before paying down debt in the following year. These results highlight the importance of considering macroeconomic conditions when studying firm uses of tax-related cash flow and the related effects on firm financial health.

German shift on austerity would risk 'wrong' lessons

2015 ◽  
Keyword(s):  
Euro Area ◽  
Credit Rating ◽  
Bond Yields ◽  
Trade Surplus ◽  
Fiscal Stimulus ◽  
Content Type ◽  
Black Spots ◽  
Angela Merkel ◽  
Deficit Financing ◽  
The Government

Significance Chancellor Angela Merkel faces a rising tide of euro-area members in favour of a policy shift away from austerity and possibly towards more favourable debt deals for euro-area black spots. Adding to the pressure for change, her own voters may prefer a slower pace of debt reduction: German government debt has already been falling as a percentage of GDP -- from over 80% in 2010 to under 77% at the end of 2014 -- and debt is starting to fall in absolute terms as well. The government has delivered enough stabilisation (ie, austerity) and growth to tame the 2009-10 debt surge and maintain its AAA credit rating, but is now over-achieving in terms of its own tough targets because the greater-than-expected fall in debt interest costs is pushing the budget into surplus. Some modest spending adjustments look likely to curb this windfall surplus, yet many will argue that more could be done to re-energise the sluggish economy -- and boost the euro-area. Impacts The plummeting euro will provoke another rise in German exports (already near 50% of GDP) and tensions over Germany's bulging trade surplus. While a fiscal stimulus and/or higher wage payments could address these tensions and raise imports, there is no sign of such action. Germany's critics are gathering support to end austerity, to the point of ignoring the risks of deficit financing and reneging on debts. Ultra-low German bond yields, encouraged by the prospective supply fall, are dragging down euro-area yields, delivering wider benefits.

scholarly journals Global Financial Cycles and the Exchange Rate Regime: A Perspective from Emerging Markets

2018 ◽  
Vol 108 ◽  
pp. 499-504 ◽  
Author(s):  
Maurice Obstfeld ◽  
Jonathan D. Ostry ◽  
Mahvash S. Qureshi
Keyword(s):  
Exchange Rate ◽  
Emerging Markets ◽  
Exchange Rate Regime ◽  
Emerging Market ◽  
Exchange Rate Regimes ◽  
Exchange Rate Flexibility ◽  
Macroeconomic Conditions ◽  
Financial Conditions ◽  
Advanced Economies ◽  
Financial Cycles

This paper examines the claim that exchange rate regimes are of little relevance in the transmission of global financial conditions to domestic financial and macroeconomic conditions. Our findings suggest that exchange rate regimes do matter, at least for emerging market economies. The transmission of global financial shocks to domestic variables is magnified under fixed exchange rate regimes relative to more flexible regimes. For advanced economies, however, the jury is still out, as the recent paucity of truly fixed regimes among these economies poses a challenge for estimating the effect of exchange rate flexibility.

scholarly journals FINANCIAL HEALTH OF ENTERPRISES INTRODUCING SAFEGUARD PROCEDURE BASED ON BANKRUPTCY MODELS

2018 ◽  
Vol 19 (5) ◽  
pp. 692-705 ◽  
Author(s):  
Jaroslav Schönfeld ◽  
Michal Kuděj ◽  
Luboš Smrčka
Keyword(s):  
Descriptive Statistics ◽  
Financial Health ◽  
Z Score ◽  
Problematic Situation ◽  
The Czech Republic ◽  
Financial Situation ◽  
Financial Conditions ◽  
Time Period ◽  
One Year ◽  
The Individual

This paper is focused on the financial situation of enterprises introducing safeguard procedure (in other words moratorium) in the Czech Republic. The paper’s aim is to show if the enterprises asking for the safeguard procedure do have financial conditions for recovering and maintaining the going concern principle. The safeguard procedure should help the enterprise to solve their problematic situation because it protects them against creditors for the court approved time period. The safeguard procedure cannot be successful when the financial situation is extremely poor and therefore this paper analyses the enterprises’ financial situation upon applying for safeguard. The situation is evaluated using bankruptcy models, such as Altman Z-Score, Kralicek Quick Test, IN 99 and IN05. The evaluation is conducted in different time moments, specifically one year, two years and three years before implementing the safeguard procedure. Results for the individual enterprises are summed up by basic descriptive statistics as mean, median, low and upper quartiles. The results show that the financial situation of most enterprises was very poor before introducing the safeguard procedure and it had deteriorated during the years before.

scholarly journals Penilaian Kesehatan Bank (Studi Pada PT. Bank Muamalat Indonesia, Tbk. Tahun 2016- 2019)

2021 ◽  
Vol 6 (1) ◽  
pp. 1
Author(s):  
Citra Puspa Permata
Keyword(s):  
Corporate Governance ◽  
Annual Report ◽  
Secondary Data ◽  
Descriptive Study ◽  
Risk Profile ◽  
Financial Health ◽  
Self Assessment ◽  
Financial Condition ◽  
Financial Conditions ◽  
Good Corporate Governance

This study aims to determine the financial health of PT. Bank Muamalat Indonesia, Tbk from four aspects in RGEC which is Risk Profile, Good Corporate Governance, Earnings, and Capital. This research is a descriptive study with a quantitative approach. The main data of this study comes from the Annual Report of PT. Bank Muamalat Indonesia, Tbk. from 2016 to 2019, the so-called secondary data were analyzed using the RGEC method. The results showed that in the period 2016-2019, the risk profile aspect of PT. Bank Muamalat Indonesia with the NPF and  FDR Indicator on average is in a healthy financial condition, but the CR indicator showed unhealthy financial conditions. The GCG aspect using self-assessment showed a fairly healthy financial condition, the earnings aspect. with NOM, ROA and average ROE showed unhealthy financial conditions, as well as the capital aspect with average CAR and PR ratios is in very healthy financial conditions.

scholarly journals Republic of Armenia

2020 ◽  
Vol 20 (176) ◽  
Author(s):  
Keyword(s):  
Public Health ◽  
Health Services ◽  
Current Account ◽  
Public Health Services ◽  
Macroeconomic Conditions ◽  
Financial Conditions ◽  
Current Account Deficits ◽  
Vulnerable People ◽  
Near Term ◽  
The Impact

The impact of the COVID-19 pandemic and the tightening of global financial conditions have disrupted the, until recently, favorable macroeconomic conditions. The near-term outlook has significantly weakened, with growth expected to decline to -1½ percent in 2020, and the fiscal and the current account deficits widening considerably this year. These projections are subject to more than the usual uncertainty. The authorities’ response has been timely and proactive, focusing on strengthening the provision of public health services, limiting domestic contagion, and introducing targeted economic relief measures aimed at assisting viable businesses and vulnerable people weather the crisis.

Low oil prices set to accelerate Gulf subsidy reform

2015 ◽  
Keyword(s):  
Oil And Gas ◽  
Credit Rating ◽  
Government Expenditure ◽  
Oil Prices ◽  
Sharp Drop ◽  
Capital Projects ◽  
Content Type ◽  
Near Term ◽  
Rating Downgrades ◽  
Personal Incomes

Significance The sharp drop in oil prices to around 50 dollars, half their average level last year, has forced a serious fiscal rethink among the six Gulf Cooperation Council (GCC) states, who are heavily dependent on oil and gas exports. Following a decade of high oil prices, and a widespread assumption that prices would remain above 100 dollars, government expenditure has become bloated, with generous salaries and subsidies, and ambitious capital projects. Impacts Companies competing for government tenders are likely to face greater scrutiny over costs. Consumer-facing companies will be less seriously affected, given the likely limited impact on personal incomes in the near term. Bahrain and Oman could suffer credit rating downgrades. Stability in other GCC states is unlikely to be affected due to the protection of citizen benefits. Saudi Arabia will provide Bahrain with financial support if the fiscal squeeze weakens stability there.

Do macroeconomic conditions affect corporate cash holdings and cash adjustment dynamics? Evidence from GCC countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moncef Guizani ◽  
Ahdi Noomen Ajmi
Keyword(s):  
Financial Constraints ◽  
Cash Holdings ◽  
Economic Conditions ◽  
External Financing ◽  
Macroeconomic Factors ◽  
Content Type ◽  
Macroeconomic Conditions ◽  
Gcc Countries ◽  
Cash Reserves ◽  
Corporate Cash Holdings

PurposeThis study aims to investigate the influence of macroeconomic conditions on corporate cash holdings in terms of their influence on the level of cash and the speed of adjustment of cash to target levels in the Gulf Cooperation Council countries (GCC).Design/methodology/approachThe study employs both static and dynamic regression analyses considering a sample of 2,878 firm-year observations drawn from stock markets in GCC countries over the 2010–2018 period.FindingsConsistent with the precautionary motive, the results show that GCC firms tend to accumulate cash reserves in weak economic periods. Evidence also reveals that the estimated adjustment coefficients from dynamic panel models show that GCC firms adjust more slowly toward their target cash ratio in periods of unfavorable economic conditions.Practical implicationsThis study has important implications for managers, policymakers and regulators. For managers, the study is an important reference to understand and design cash management policies by considering financial constraints imposed by macroeconomic conditions. In particular, managers should pay more attention to periods of credit crunch and weak economic conditions in which firms may be exposed to greater bankruptcy risks. For policymakers and regulators, this study may be useful in assessing the effect of macroeconomic factors on firm's cash holding decision. Therefore, in an effort to increase the supply of external financing available to firms, policymakers may devise investment friendly environment by controlling macroeconomic factors.Originality/valueThis paper offers some insights on the macro determinants of cash holdings by investigating emerging economies. It explores the role of macroeconomic conditions on corporate cash holdings in terms of their influence on the costs of external funds and financial constraints.

The impact of market sectors and rating agencies on credit ratings: global evidence

2019 ◽  
Vol 20 (5) ◽  
pp. 389-410
Author(s):  
Kerstin Lopatta ◽  
Magdalena Tchikov ◽  
Finn Marten Körner
Keyword(s):  
Credit Risk ◽  
Credit Rating ◽  
Credit Ratings ◽  
Content Type ◽  
Rating Agencies ◽  
Credit Rating Agency ◽  
Rating Agency ◽  
Investment Grade ◽  
The Impact ◽  
Rating Downgrades

Purpose A credit rating, as a single indicator on one consistent scale, is designed as an objective and comparable measure within a credit rating agency (CRA). While research focuses mainly on the comparability of ratings between agencies, this paper additionally questions empirically how CRAs meet their promise of providing a consistent assessment of credit risk for issuers within and between market segments of the same agency. Design/methodology/approach Exhaustive and robust regression analyses are run to assess the impact of market sectors and rating agencies on credit ratings. The examinations consider the rating level, as well as rating downgrades as a further measure of empirical credit risk. Data stems from a large global sample of Bloomberg ratings from 11 market sectors for the period 2010-2018. Findings The analyses show differing effects of sectors and agencies on issuer ratings and downgrade probabilities. Empirical results on credit ratings and rating downgrades can then be attributed to investment grade and non-investment grade ratings. Originality/value The paper contributes to current finance research and practice by examining the credit rating differences between sectors and agencies and providing assistance to investors and other stakeholders, as well as researchers, how issuers’ sector and rating agency affiliations act as relative metrics.

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