Fiscal Stimulus Impact on Firms' Profitability During the Global Financial Crisis

By Carolina Correa-Caro, Leandro Medina, Marcos Poplawski Ribeiro, Bennett W Sutton

November 28, 2018

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Format: Chicago

Carolina Correa-Caro, Leandro Medina, Marcos Poplawski Ribeiro, and Bennett W Sutton. Fiscal Stimulus Impact on Firms' Profitability During the Global Financial Crisis, (USA: International Monetary Fund, 2018) accessed September 18, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Using financial statement data from the Thomson Reuter’s Worldscope database for 22,333 non-financial firms in 52 advanced and emerging economies, this paper examines how fiscal stimulus (i.e., changes in structural deficit) interacted with sectoral business cycle sensitivity affected corporate profitability during the recovery period of the global financial crisis (GFC). Using cross-sectional analyses, our findings indicate that corporate profitability improved significantly after the GFC fiscal stimulus, especially in manufacturing, utilities and retail sectors. Firm size and leverage are also found to be significant in explaining changes in corporate profitability.

Subject: Business cycles, Central bank policy rate, Economic growth, Expenditure, Financial services, Fiscal policy, Fiscal stimulus

Keywords: And amortization, Business cycles, Central bank policy rate, Debt ratio, Depreciation, Earnings before interest, Financial statement variable, Firm indebtedness, Firm level, Firm Profitability, Firms' profitability, Firms sales, Fiscal Stimulus, Global, Global Financial Crisis, Government spending, Market firm, Potential GDP, Taxes, Total assets, Working capital, Worldscope, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/251
Stock No:

WPIEA2018251
ISBN:

9781484380659
ISSN:

1018-5941

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