Corporate leverage and monetary policy transmission mechanism in India: A dynamic approach.

The macroeconomic policies of a nation have a major bearing on the financial performance of the companies and their potential sustainability and growth. This study investigates the impact of monetary policy on the corporate leverage adjustment through microscopic monetary policy transmission channels, mainly the interest rate and credit channels, using a sample of 422 manufacturing firms in India from 2011 to 2017 by employing partial adjustment model. The findings suggest that contractionary monetary policy cuts down overall corporate debt. The study further asserts that corporate debt in Indian firms demonstrates target behaviour and the speed at which firms adjust their actual debt ratios towards target debt ratios is a function of not only firm-specific characteristics but also macroeconomic conditions prevailing in the country, proxied by monetary policy indicators in our study. The study has critical policy implications as the balance sheet situation of corporates is a crucial factor in the financial stability of the economy.

Will environmental information disclosure affect bank credit decisions and corporate debt financing costs? Evidence from China's heavily polluting industries

In the context of green finance, whether listed companies in heavily polluting industries can convert the external pressure of environmental information disclosure into internal motivation is critical to achieving environmental governance goals. This paper selects 946 listed companies of 16 heavily polluting industries in the Shanghai and Shenzhen stock markets as samples to explore whether environmental information disclosure can help companies increase bank credit support and reduce debt financing costs to transform their external pressures into internal motivation. The empirical results show that there is a significant positive correlation between environmental information disclosure and bank credit decisions. From the perspective of financing scale, heavily polluting companies have the inherent motivation to disclose environmental information actively and proactively to obtain more credit support. There is no significant relationship between the corporate debt financing cost and environmental information disclosure. This paper puts forward some critical policy suggestions for government decision makers, heavily polluting enterprises and financial institutions.

Zombies at Large? Corporate Debt Overhang and the Macroeconomy

What are the macroeconomic consequences of business credit booms? Are they as dangerous as household credit booms? If not, why not? We answer these questions by collecting data on nonfinancial business liabilities (primarily bank loans and corporate bonds) for 17 advanced economies over the past 150 years. Unlike household credit, business credit booms are rarely followed by macroeconomic hangovers. Data on debt renegotiation costs—instrumented by a country’s legal tradition—show that frictions to debt resolution make recessions deeper and longer—an important factor in explaining the differences with household credit booms.

NON-PERFORMING ASSETS OF BANKING SECTOR IN INDIA

Priority sector lending, non-priority sector lending, corporate debt restructuring and accumulation of non- performing assets have now become an interesting topic of discussion and debate. Evolution of priority sector credit since social control of banks back in 1967 has a chequered history till emergence of micro finance as a tool of poverty alleviation. Various committees formed by RBI and the Government of India have reviewed progress of priority sector lending and recommended measures for revamping the structural and operational measures related to social banking. On the other side, non-priority sector NPAs and corporate debt restructuring seems to be alarming nowadays. Till the year 2011 the situation was different, but after 2011 with the implication of BASEL II, banks are bound to show their stressed assets and restructuring measures are in full swing. In 2015 the corporate debt restructuring was highest in last 10 years. With the introduction of financial sector reforms and adoption of prudential accounting norms following BASEL convention, the banks have been passing through tremendous crisis with phenomenal growth of nonperforming assets. This paper analyses the growth of priority sector non-performing assets, non-priority sector non-performing assets and its contribution towards building up total non-performing assets and investigates the relationship of non-performing assets with some economic parameters. It also analyses the association of corporate debt restructuring with non-performing assets and tries to find out relationship of the above two. A strong correlation is found between corporate debt restructuring and NPAs. A negative association is found between NPAs and GDP growth.

Determinants of corporate debt maturity: Evidence from the consumer goods sector in Vietnam

Debt maturity structure plays an important role in enterprises’ capital structure policies, and debt maturity varies from industry to industry. The paper investigates the determinants that affect the debt maturity structure of listed firms in the consumer goods industry from 2009 to 2019. The data is collected from consumer goods companies listed on the Vietnam Stock Exchange. The feasible generalized least squares (FGLS) estimation is demonstrated to consider not only micro but also macroeconomic variables that have influenced the corporate debt maturity policy. The empirical results show that five microeconomic factors, such as capital structure, asset structure, asset liquidity, profitability, and firm size, have influenced the debt maturity and are statistically significant. Meanwhile, macroeconomic factors such as inflation rate and credit growth have significantly affected the corporate debt maturity. Finally, the paper provides some suggestions for financial managers on the optimal corporate debt maturity in the consumer goods sector and recommendations for policy-makers when implementing macroeconomic policies.