High Debt Research Articles

The Impact of Insolvency and Bankruptcy Code 2016: A Comprehensive Study

Insolvency and bankruptcy have emerged as significant concerns in the global economy, impacting firms, economies, and individuals alike. Economic volatility, high corporate debt levels, industry disruptions, and inadequate financial management contribute to the escalation of insolvency risks. The COVID-19 epidemic has made these difficulties worse., leading to a surge in bankruptcy filings worldwide. In response to the need for efficient resolution mechanisms, India introduced Insolvency and Bankruptcy Code, 2016 (IBC), introduced for streamlining insolvency proceedings and protecting stakeholders' interests. While the IBC has achieved notable successes in resolving cases, challenges still must be addressed, including declining recovery rates and prolonged resolution times.

STRUKTUR MODAL DAN KINERJA KEUANGAN BANK DI INDONESIA

This research aims to investigate how the capital structure of banks in Indonesia is related to the level of profitability, taking into account company size and the overall impact of the Covid-19 pandemic and whether the increase in capital (debt) provided by the Indonesian government affects bank profitability, providing new results. . considering the increased credit risks resulting from the pandemic. This study fulfills the research objectives by building a broad framework regarding the influence of liquidity, capital adequacy, credit risk, tax protection and ownership structure on bank financial performance. This research uses regression todetermine the effect of leverage, company size and the Covid-19 pandemic on banking profitability. Data for 38 public banks taken from the Bloomberg Terminal in 2014-2021. The research results show that leverage has a positive effect on banking profitability, while company size has a negative effect on leverage and profitability. High debt levels pressure management to meet shareholders' required returns. Large banks prefer risk-free government bonds rather than providing loans to creditors, especially when economic conditions are uncertain. The Covid-19 pandemic has no effect on banking profitability

Quantifying the impact of interest rate volatility on Asian energy companies: A comparative study of fossil and renewable sectors

This study examines the impact of government bond yield volatility on companies in the fossil and renewable energy sectors in five Asian countries from 2015 to 2023. The analysis uses quantile-based methods to explore the spillover effects of yield volatility on companies with high and low debt levels in these sectors. The findings show that yield volatility tends to transmit shocks at lower quantiles and over shorter periods. The network connectedness is more critical at extreme upper and lower quantiles in the short term. The results also reveal significant differences in how yield volatility affects companies with high and low leverage levels, and these effects vary across the sample countries. Overall, this research provides valuable insights into the influence of yield volatility on financial decision-making in different contexts and industries. The study's results underscore the imperative for policymakers and stakeholders in the energy industry to give precedence to improving risk management methods.

Blended finance as a catalyst for accelerating the European heat transition?

Against the background of accelerating climate change, this paper examines to which extent sustainable infrastructure finance can effectively contribute to the European heat transition as a part of a “Great Transformation” towards a climate neutral economy and society. Since the building sector is responsible for approximately 35% of the EU's carbon footprint, district heating and cooling networks can provide an efficient technology for decarbonizing the energy supply of buildings. New district heating and cooling networks technology allows for heat and hot water generation that is combustion free. A large-scale role-out of this infrastructure would require hundreds of billions EUR of investments within the next few years. In view of the high public debt, the public sector will not be able to finance the required investment volumes. Against the background of regulatory changes, such as the EU Action Plan on Financing Sustainable Growth, this paper examines in which way financial markets participants might be able to fill the funding gap. A particular focus lies on blended finance, since related instruments reduce investors' risks, esp. in early stages of the infrastructure lifecycle. Due to an improved risk-return-relationship this makes the investment more attractive to private investors. It is also essential for investors to understand the kind of business model they invest in. Therefore, we discuss the importance of key performance indicators in the four dimensions that are relevant for the investors' decision-making process: return, risk, liquidity and sustainability. With respect to the sustainability dimension, we elaborate on the relevance of EU-Taxonomy-aligned district heating and cooling networks' construction and operation.

The Impact of High Government Debt on Economic Development in Somalia

This study focuses on the impact of high government debt on economic development in Somalia. The specific objectives of the study encompass: to examine the impact of high government debt on Somalia's economic development, to explore the strategies that can be used to mitigate the negative impact of high government debt on economic development in Somalia and to evaluate the role of international financial institutions in managing high government in Somalia. This study employed descriptive research design and quantitative research method to investigate the impact of heavily-indebted on rebuilding economic development in Somalia. The study employed purposive sampling technique to select the participants of the study. The sample size of the study was 80 participants. To collect data from the respondents which they entail: Government officials, Economic analysts, representatives from financial institutions, Business owners and entrepreneurs, representatives from Non-governmental organizations (NGOs) and Academics (researchers and scholars). The study adopted close-ended questionnaire instrument data collected from the respondents of the study was entered, coded, sorted, organized and analyzed using Statistical Package Software Science (SPSS) version 28. The key findings of the study on the impacts of high government debt on Somalia's economic development entail: limited access to credit, increased debt servicing costs, inflation and currency depreciation, reduced investor confidence, limited fiscal space, vulnerability to external shocks and social unrest. The strategies the can be used to mitigate the negative impact of high government debt on economic development in Somalia include: promotion of financial literacy, strengthening regulatory framework, encouragement of diversification of the economy, Improving infrastructure and access to financial services, implementation of debt management strategies, fostering a conducive business environment and seeking external assistance and debt relief. And the role of international financial institutions in managing high government debt in Somalia entail: providing financial assistance, negotiating debt relief, offering technical expertise and supporting capacity-building. The study recommended that the Federal Government of Somalia should improve fiscal management and should work with international financial institutions and creditor countries to negotiate debt relief and restructuring agreements to reduce the burden of debt payments and boost economic development.

Does bankruptcy law affect the relation between leverage and firm performance?

PurposeThe purpose of this paper is to examine the impact of bankruptcy reform in the year 2016 on the relation between leverage and firm performance for Indian firms, separately for business group and standalone firms.Design/methodology/approachFixed effects panel regression is used to understand the role of bankruptcy reform on firm-level data to examine the relationship between leverage and firm performance after controlling for size, growth, age, liquidity and promoter shareholding. The authors also apply the generalized method of moments (GMM) to control for the endogeneity concerns.FindingsThe authors show that the introduction of the insolvency and bankruptcy code (IBC) positively moderates the relation between leverage and firm performance such that the extent of negative relation between leverage and firm performance is less in the post-IBC period. The positive impact of IBC on the relation between leverage and firm performance holds only for firms not affiliated to business groups and for firms with higher debt in their capital structure.Practical implicationsThe study’s findings will help the regulators appreciate the effectiveness of bankruptcy reforms resulting from IBC implementation in terms of sound bankruptcy process and leading to safeguard the interests of minority shareholders.Originality/valueThe authors provide the only study to examine the role of bankruptcy law in moderating the relation between leverage and firm performance across a sample of business group and standalone firms.

Exploring the Impact of Contemporary Consumerism on Young People

Today's college students as a special consumer group in society, and their life consumption has a certain scientific rationality, but part of consumer behavior and consumer psychology also shows an irrational tendency. Contemporary college students' consumption has its reasonableness and particularity, and at the same time, there are obvious misunderstandings in consumption behavior and consumption psychology, which need influence and help from school, family, and society. This paper uses the research method of literature review to conclude by analyzing the theory of consumerism, the characteristics of contemporary college students' consumption, and the problems caused by college students' overconsumption. First, consumerism also sows the seeds of money anxiety among young people. Young people are often at the beginning of their careers and face the challenge of financial autonomy. However, an excessive consumer culture may tempt them into high consumption and debt, increasing uncertainty in money management, which in turn causes anxiety and burden. However, research also shows that consumerism is not entirely negative for young people. In a way, this culture also stimulates creativity and innovation. Young people may contribute to the development and progress of society through the pursuit of novel experiences and products. In summary, the impact of contemporary consumerism on young people is a complex and multifaceted topic. The paper will dig deeper into the various dimensions of this phenomenon and explore the challenges and opportunities involved, to provide useful perspectives for better understanding and responding to this social phenomenon.

Pengaruh Leverage, Komite Audit dan Kualitas Audit Eksternal Terhadap Penghindaran Pajak

The income that a country has in developing the economy in each region is generated by the APBN budget, one of which is revenue from taxes, where taxes are a sector that dominates the main source of state income and can be used for people's welfare. However, there is often an inappropriate target in tax management, where there are still taxpayers who carry out tax avoidance actions which can have an impact on the stability of the country. Tax avoidance is often caused by taxpayers having higher debt than capital, as well as other things such as the performance of external auditors which is not optimal and lack of supervision by the audit committee every time a financial report is submitted. This research aims to identify leverage, audit committee and external audit quality variables on tax avoidance in manufacturing companies listed on the IDX within a period of 4 years, namely 2019 - 2022. This research uses objects on 22 companies listed on the Stock Exchange Indonesian Effect 2019-2022, analysis technique using panel data regression using the fixed effect model (FEM). The results show that overall the quality of external audits and audit committees has a positive influence at a significance level of 0.05, while leverage (DER) with a probability value of 0.88 > 0.05 means that companies that are the object of research tend to have higher liabilities and tax burdens. . Apart from that, this research, from the results of the unit root test and cointegration test, can be interpreted as saying that the variables used are appropriate and have a long-term nature and are supported by the absence of elements of classical assumptions. Apart from that, the value of r-square is 0.7394 (73.94%) where the remaining 26.06% is influenced by types of variables outside this research such as the tax gap, capital buffer and other financial ratios.

Cybersecurity and executive compensation: Can inside debt-induced risk aversion improve cyber risk management effectiveness?

This study contributes to the emerging literature on the determinants and the consequences of cyberattacks by examining the impact of inside debt compensation on a firm's likelihood of experiencing a cyberattack and on attacked firms' cash holdings, R&D investments, and asset tangibility. We provide compelling evidence that inside debt compensation reduces the probability of experiencing a cyberattack. Furthermore, we document that high inside debt CEOs reduce their firm's cash holdings while they increase R&D investments and asset tangibility once their firms experience a hacking incident. These effects persist for three years after the attack. Our results are robust to alternative measurements of inside debt compensation and after accounting for potential sample selection and endogeneity concerns. Our findings underscore the importance of inside debt compensation as a governance mechanism that alleviates inefficiencies related to cybersecurity investments.

Don’t blame the government!? An assessment of debt forecast errors with a view to the EU Economic Governance Review

In view of the increased importance of debt developments in the EU governance framework, this paper investigates the accuracy and the main economic causes of forecast errors in (government) debt projections. We find a positive average debt forecast error for European Union member states, which increases with the projection horizon. Underestimation of debt growth is particularly relevant for countries with high government debt. The main drivers of the debt forecast errors seem to be partly outside direct government control: Wrongly projected overall GDP developments and stock flow adjustments - a factor which has not been considered in the literature so far. Moreover, the high uncertainty in debt forecasts is also inherent in the European Commission’s benchmark forecasts: only their now-cast remains unbiased.

Investing in European Public Goods While Maintaining Fiscal Discipline at Home

Abstract Putting the high public debt ratios on a downward path after the surge during the pandemic and allocating sufficient resources to deliver on the green and digital transition will be among the priorities confronting the EU institutions emerging from the June 2024 European elections. After a long and painful debate, EU institutions have agreed upon a new fiscal rulebook that aims to incentivise the reallocation of national public spending to the green and digital transition. However, the additional public investment is unlikely to suffice to comply with the goals of net zero that the EU has set for itself. In particular, investments of a transnational nature will remain undersupplied. This article proposes setting up a successor to NextGenerationEU – a new EU fund until 2030 for financing European public goods (EPGs) to address the double transition. Access to the facility would be conditional on adherence to the EU fiscal rules. By tying up the implementation of the new fiscal framework, the debate on the future of NextGenerationEU and the next multiannual EU budget post-2027, the credibility and internal consistency of these various instruments will be greatly enhanced.

Trade Openness and Economic Growth: Evidence from Countries in Asia and the South Pacific

Abstract This study examines the relationship between trade openness and economic growth across selected Asian and South Pacific countries from 2000 to 2021. Key indicators on Gross Domestic Product (GDP) growth rate, foreign debt, export values, and inflation are analyzed for insights into economic dynamics. Positive correlations between foreign debt and export values suggest export utilization to alleviate debt. Conversely, negative correlations between inflation and export values underscore challenges during inflationary periods, emphasizing need for effective inflation management. Fixed Effects Model analysis unveils coefficients for independent variables, highlighting their impact on GDP. The study's explanatory power, measured by the R-squared value, underscores the collective influence of these variables on GDP variation. Policy implications stress the importance of export promotion strategies to bolster revenue amidst high foreign debt levels. Effective inflation management is vital to maintain export competitiveness. Prudent debt management emerges as crucial for economic stability. Future research should explore nuanced mechanisms linking trade openness and economic growth, tailored to each country's economic context. This approach can inform targeted policy recommendations, acknowledging diversity among nations. Globally, the study emphasizes interconnectedness among countries and the significance of collaborative efforts to navigate shared challenges and capitalize on mutual opportunities in the global economy. Keywords: Trade openness, Economic growth, Gross domestic product, Foreign debt, Fixed effects model.

Exposure to Dollar, financial Openness, and the heterogeneous impact of US monetary spillover

This paper studies how country heterogeneities, especially in their (1) net exposure to dollar debt and (2) financial openness affect the propagation of US monetary shocks into peripheral advanced and emerging economies. We contribute to the understanding of how interest rate and GDP responses of emerging countries depend on both their dollar liability and financial openness, as well as the interaction between these two factors. Specifically, we find that economies with higher debt dollarization have higher interest rate responses to contractionary US monetary shocks to prevent negative balance sheet effects. We also find that GDP decreases by more for economies with high debt dollarization if their financial openness is high. Using capital control as the de jure measure of financial openness, we obtain similar results that GDP decreases by more for countries net short of dollar if capital control is low, and at the same time, GDP is higher for countries with higher capital control if they are more indebted in dollar. Combined, these imply that capital control helps dampen negative US monetary spillover, and the benefit from imposing capital control is larger for countries that are more indebted in dollar.

Racial Disparities in Cognitive Health Among Older Americans: The Role of Debt-Asset Profiles During Preretirement Age.

Low-cost debt can potentially enhance wealth and indirectly benefit health, yet Black Americans disproportionately lack this type of debt, which may constrain their ability to accumulate wealth throughout their lives and across generations. Our objectives are to develop a novel debt-asset measure, use it to quantify the Black-White differential in debt-asset profiles, and estimate its contribution to the racial gap in cognition. Using the Health and Retirement Study (1998-2020), we grouped individuals based on debt and asset information during the preretirement period of ages 55-61, including the absence of debt and the relative amount of debt compared to assets. Linear mixed models were used to examine the extent to which cognition in later life (ages 62-80) differs across these debt-asset profiles and its role in explaining the racial disparity in cognition. Compared with Whites, Blacks were more likely to fall into categories characterized by high debt-to-asset ratio (DAR) or limited asset ownership. Low-asset nonborrowers displayed the poorest cognition, followed closely by high-DAR borrowers. The Black-White differential in debt-asset profiles contributed to the racial gap in cognition. There were 2unfavorable debt-asset profiles: high debt relative to assets and little or no debt due to a lack of assets, which was more prevalent among Blacks than Whites. We discuss how institutional and structural racism shapes Black-White disparities in debt-asset profiles, such as limited access to borrowing opportunities, thereby contributing to health inequalities, including cognition.

COVID-19 effects and home-grown policy response in Sri Lanka

The paper examines the fascinating case of middle-income Sri Lanka with pre-existing macroeconomic weaknesses hit by COVID-19. The pandemic created a public health emergency and an economic crisis in 2020, causing economic damage and dampening Sri Lanka’s development prospects. The evidence shows a sudden growth contraction, a steep rise in poverty, falling women’s employment, worsening macroeconomic imbalances, and high external debt levels rising. Rather than requesting early IMF assistance for its balance of payments problems, President Gotabaya Rajapaksa’s government opted for home-grown remedies including ultra-loose monetary policy, import controls, bilateral swaps and loans, and a ban on fertilizer imports. The unconventional policy mix temporarily mitigated economic scaring from COVID-19 and supported the economy. But the distortions introduced by prolonging this unconventional mix and the Russia-Ukraine conflict shock pushed Sri Lankan economy into external debt default, a worsening economic crisis and Rajapaksa’s resignation in 2022.

A Markov-Switching model of public debt in South Africa

This research aimed to explore the sustainability of public debt with changes in the South African regime from 1960 to 2020. Annual data was obtained from the South Africa Reserve Bank, and the Markov-switching autoregressive (MS-AR) model was employed to describe the public debt process in South Africa. Compared to traditional endogenous modelling, the process explicitly allows for the possibility of regime changes. Regime 1 defines the stages of high public debt, and regime 2 describes periods of a downward trend in public debt. The results reveal that in regime 1, there is a 98% likelihood of remaining in high public debt and a lower probability of 1.76% switching to a lower public debt regime. Also, when the system is in a lower debt regime, there is a 98.2% likelihood of remaining in a lower public debt state and a lower probability of 1.74% switching to a higher public debt state. The expected average duration of a period of higher public debt is 56 years, while the average duration of a lower public debt regime is 57 years. This implies that it is only in an extreme event that public debt can switch from a high-debt regime to a low-debt regime and vice versa. Hence, it is suggested that the government implement policies knowing that public debt will not decline suddenly.

Accelerate or brake?—The connection of credit gaps and economic disequilibrium

AbstractCredit supply shocks significantly aggravate the impact of economic recessions. Understanding the underlying reasons why credit market shocks occur and detecting the market turbulences in time can give a decision support tool for the economic policy to intervene more efficiently on the market and to reduce the effect of economic downturns. The goal of the current article is to investigate the factors that signal possible credit shocks by analyzing the quarterly data of 17 European countries over the period 1995–2021. The focus of the article is on the credit given to the nonfinancial corporations. In our analysis, we have built on the credit gap methodology by determining the deviations of the lending activity from its trend, and then we have modeled these credit gaps using fundamental macroeconomic indicators, such as the balance of the current account, the ratio of short‐ and long‐term capital investments and government debt. Our conclusion is that in the presence of fundamental disequilibrium in the economy excessive lending creates positive credit gaps that increase the chance of negative credit market shocks. According to our new findings, the existing credit gap methodology can be improved by incorporating real economic factors; slowing long‐term capital investment and increasing the deficit of the current account signal the emergence of a credit gap. We found significant regional heterogeneity as in Southern European countries, and the credit gaps were more substantial. Among the investigated macroeconomic factors, the governmental indebtedness was especially high in these countries suggesting that countries with high public debt rates are more prone to develop credit gaps.

The effect of ESG activities on financial performance: The moderating effect of debt ratio

This study examined the effect of environmental, social, and governance (ESG) management on corporate performance. We collected sample data on KOSPI-listed companies in 2021 using ESG ratings released by the Korea Corporate Governance Service. The system of ratings was segmented into three distinct categories for the purpose of analysis, namely the environment, society, and governance. An empirical investigation was conducted to determine how ESG ratings and separate ratings (E, S, and G ratings) affect financial performance. We also examined the moderating impact of the debt ratio on the association between ESG ratings and financial performance to enhance the explanatory strength of this relationship. The results indicated that ESG ratings and E and S ratings are positively related to financial performance, and the debt ratio has a negative moderating effect on the link between ESG ratings related to environmental aspects and financial performance. The findings indicate that firms need ESG management to improve financial performance. ESG ratings can be utilized to show the effects of environment-focused management, sustainability, and CSR initiatives on financial performance. Additionally, the moderation effect of the debt ratio in this study clearly demonstrates the connection between ESG rating and financial performance. Our analysis also demonstrates that organizations with high debt ratios and a lack of resources to pursue ESG are unable to devote a significant amount of time and resources to ESG management.

Impact of quantitative easing on the U.S. economy

The US economy is facing instability due to high inflation and high credit card debt. Central banks have adopted quantitative easing (QE) as a monetary policy tool to promote economic growth and reduce the risk of deflation. QE measures originated from the 2008 global financial crisis to counter the threat of recession and deflation. This paper examines the impact of quantitative easing on the U.S. economy in four stages through data, image analysis and collection of related literature. Quantitative easing is a high-risk monetary policy. However, while quantitative easing stimulates the economy by lowering interest rates, it can also lead to inflation and borrowing pressures. This paper applies a combination of qualitative analysis and quantitative analysis, has been about the theory of monetary policy on the basis of the process of successive QE is summarized, and the Federal Reserve's aggressive interest rate hikes in the past two years to review. Finally, this paper analyzes the impact of QE, an unconventional monetary policy on the economy, and analyzes the future forecast. The research in this paper can be a certain reference for the monetary policy to cope with the crisis and unconventional situations.

Evaluation of Investment Value of Commercial Banks: Taking ICBC as an Example

The banking industry is the most important component of the national economy, and people's daily deposit and loan business is closely related to banks. In recent years, the development speed of China's banking industry has been extremely fast, and many commercial banks have successfully gone public, achieving a rapid doubling of their asset size. Therefore, many investors are turning their attention to the banking industry. However, as a special enterprise with high debt characteristics, banks have differences in their investment analysis compared to other enterprises. Therefore, many scholars have also conducted research on this issue. Previous research has focused more on analyzing whether various estimation methods are suitable for investment analysis of commercial banks and providing relevant investment recommendations by comparing the estimated commercial bank value with the benchmark date value. This article takes ICBC as an example to estimate the intrinsic value of its stocks using the DDM model, compares the intrinsic value of the stocks with market prices, studies whether there are differences, analyzes the potential reasons for the differences and provides relevant investment suggestions.