High corporate debt risks Brazil's post-COVID recovery

Significance Small companies have been the most affected. Government programmes have supplied credit but struggled to channel funds to the neediest companies, especially at the beginning of the pandemic last year. Large companies, although remaining the major credit borrowers, have also accessed funding via debt issuance and stock offerings in capital markets. Impacts Companies’ financial obligations will increase along with recent rises in interest rates. Lack of adequate government support this year may delay economic recovery. New investments are less likely in face of mounting corporate debt. The impact of rising liabilities will be more prolonged for small businesses.

Demand or supply shock during the COVID-19 crisis: empirical evidence from public firms in Indonesia

Purpose In examining an economic fluctuation, researchers often refer to the theories of impaired access to capital which mostly explain, from the perspective of bank lending supplies, a shock in firm’s access to investment would decrease its capital expenditures and net debt issuance during crisis period. However, some studies show that this is not always the case. A demand shock theory can explain the decrease in firm’s capital expenditures and net debt issuance during crisis period, but there should be no causal link between the two. This is because firms naturally do not invest during crisis period because of a decrease in investment wealth during crisis period. This paper aims to examine these theories with respect to the Covid-19 crisis in Indonesia. Design/methodology/approach The change in firms’ capital expenditure and net debt issuance is analyzed using a non-parametric difference-in-difference and matching estimator across four firm-dimensions to see whether the implications of the supply shock theory apply to the current crisis or if that firms naturally do not invest during the crisis. In addition, this paper provides the result of panel regression to confirm the causal link between firms’ investment funds and capital expenditure, with an addition of consumer confidence index to accommodate the implications of the demand shock theory. Findings The results of this paper show that the implications of the supply shock theory cannot explain the economic fluctuation during the Covid-19 crisis. Rather, the results suggest that firms naturally do not want to invest during the crisis and that the demand shock can better explain the economic fluctuation during the Covid-19 crisis. This is confirmed by the result of panel regression which shows that only consumer confidence index has a significant positive relationship with firms’ capital expenditure. Originality/value This is the first study to examine the theory of impaired access to capital with respect to the Covid-19 crisis in Indonesia.

Benin’s Talon is poised to secure re-election in 2021

Significance He has said that he will announce next month whether he will contest the April 2021 presidential election. On the economic front, Talon’s first term has been very successful, but on the political front he has weakened democratic institutions, with virtually no parliamentary opposition for the first time since multiparty democracy was introduced in 1990. Impacts Talon will likely intensify diplomatic efforts to repair relations with Nigeria following the latter's ongoing border closures. Talon will look to increase Benin’s external financing, principally through debt issuance, to fund his development agenda. Benin's recent decision to withdraw from the African Court of Human and Peoples' Rights further highlights Talon's authoritarian tendencies.

Financing Corporate Growth

Considerable research tackles the aggregate impact of debt financing. We show that equity is more important for firm growth than generally understood. A dollar of equity issuance is associated with an extra $0.93 of real assets, whereas a dollar of debt issuance is associated with an extra $0.14. Firms issue equity first, then increase real assets, and, finally, issue debt while repurchasing equity. We explain this sequence using a model in which debt is tax preferred relative to equity but is subject to limited commitment. We use the estimated model to evaluate how several government policies affect corporate growth.

Fiscal crisis will undermine Suriname's new president

Significance Barely four months into President Chandrikapersad Santokhi’s presidency, the scale of the fiscal crisis facing Suriname has forced him to introduce unpopular fiscal austerity measures and seek a restructuring of external debt. These measures should help improve Suriname’s fiscal position, but also risk increased social unrest. Impacts Two debt restructurings in one year mean that Suriname would be unlikely to find buyers for any potential 2021 debt issuance. The government will heavily promote investment in the oil industry as a means of attracting funds into the economy. Failure to reach an IMF agreement would put severe pressure on the economy next year.

CASH FLOW, DEBT ISSUANCE, EQUITY ISSUANCE, AND FIXED ASSET INVESTMENT ON MANUFACTURE COMPANY 2010-2014CASH FLOW, DEBT ISSUANCE, EQUITY ISSUANCE, AND FIXED ASSET INVESTMENT ON MANUFACTURE COMPANY 2010-2014

Matters about financing decision based on pecking order theory’s hierarchy are currently appealing. This research strives to discover how corporate’s fixed asset investment reacts to cash flow, debt issuance, and equity issuance. Researcher uses 75 samples of manufacturing company in Indonesia during 2010-2014 period with 199 firm-year observation. Multiple linear regression’s result indicates that cash flow and debt issuance have influence towards corporate’s fixed asset investment, but the equity issuance have no influence towards corporate’s fixed asset investment. Also regression coefficient exhibits that manufacturing company in Indonesia follows pecking order theory’s hierarchy. Cash flow’s influence towards fixed asset investment is more significant than debt issuance’s, and debt issuance’s influence is stronger than equity issuance. This points out that corporate’s fixed asset investment is more sensitive towards cash flow (internal fund) compared to debt issuance (external fund), and so is debt issuance is more sensitive compared to equity issuance. With all that in mind, it is concluded that manufacturing company in Indonesia follows pecking order theory in terms of financing decision, which uses internal fund at first then started to use external fund if deemed necessary.