G3 - Corporate Finance and Governance

• Financial Distress and Hedging: Evidence from Canadian Oil Firms

  Staff Discussion Paper 2019-4 Kun Mo, Farrukh Suvankulov, Sophie Griffiths

  The paper explores the link between financial distress and the commodity price hedging behaviour of Canadian oil firms.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial markets, Firm dynamics JEL Code(s): G, G3, G32, Q, Q4, Q40

• Firm-level Investment Under Imperfect Capital Markets in Ukraine

  Staff Working Paper 2019-14 Oleksandr Shcherbakov

  This paper develops and estimates a model of firm-level fixed capital investment when firms face borrowing constraints.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Economic models, Firm dynamics JEL Code(s): C, C6, C61, C63, D, D2, D24, G, G3, G31

• The Role of Corporate Saving over the Business Cycle: Shock Absorber or Amplifier?

  Staff Working Paper 2018-59 Xiaodan Gao, Shaofeng Xu

  We document countercyclical corporate saving behavior with the degree of countercyclicality varying nonmonotonically with firm size. We then develop a dynamic stochastic general equilibrium model with heterogeneous firms to explain the pattern and study its implications for business cycles.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E2, E20, E22, E3, E32, G, G3, G31, G32

• The Impact of Government Debt Supply on Bond Market Liquidity: An Empirical Analysis of the Canadian Market

  Staff Working Paper 2018-35 Jeffrey Gao, Jianjian Jin, Jacob Thompson

  This paper finds that Government of Canada benchmark bonds tend to be more illiquid over the subsequent month when there is a large increase in government debt supply. The result is both statistically and economically significant, stronger for the long-term than the short-term sector, and is robust when other macro factors are controlled for.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Debt management, Financial markets JEL Code(s): D, D5, D53, G, G1, G12, G18, G2, G3, G32
• June 7, 2018

  The Bank of Canada’s Financial System Survey

  Financial System Review - June 2018 Guillaume Bédard-Pagé, Ian Christensen, Scott Kinnear, Maxime Leboeuf

  This report presents the details of a new semi-annual survey that will improve the Bank of Canada’s surveillance across the financial system and deepen efforts to engage with financial system participants. The survey collects expert opinions on the risks to and resilience of the Canadian financial system as well as on emerging trends and financial innovations. The report presents an overview of the survey and provides high-level results from the spring 2018 survey.

  Content Type(s): Publications, Financial System Review articles Topic(s): Financial institutions, Financial markets, Financial services, Financial stability, Financial system regulation and policies, Recent economic and financial developments JEL Code(s): C, C8, C83, G, G1, G11, G18, G2, G28, G3, G32

• Measuring Vulnerabilities in the Non-Financial Corporate Sector Using Industry- and Firm-Level Data

  Staff Analytical Note 2018-17 Timothy Grieder, Michal Lipsitz

  Aggregate non-financial corporate debt-to-GDP has been growing rapidly in recent years and is at an all-time high. This growth began in 2011 and accelerated as the oil price shock affected the Canadian economy.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Financial stability, Monetary and financial indicators, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): G, G0, G01, G3, G32

• Credit Risk Transfer and Bank Insolvency Risk

  Staff Working Paper 2017-59 Maarten van Oordt

  The present paper shows that, everything else equal, some transactions to transfer portfolio credit risk to third-party investors increase the insolvency risk of banks. This is particularly likely if a bank sells the senior tranche and retains a sufficiently large first-loss position.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit risk management, Financial institutions, Financial stability JEL Code(s): G, G2, G21, G28, G3, G32

• Recent Evolution of Canada’s Credit-to-GDP Gap: Measurement and Interpretation

  Staff Analytical Note 2017-25 Timothy Grieder, Dylan Hogg, Thibaut Duprey

  Over the past several years, the Bank for International Settlements has noted that Canada’s credit-to-GDP gap has widened and is above thresholds indicating future banking stress.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Financial stability, Monetary and financial indicators, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): D, D1, E, E3, E32, G, G0, G01, G1, G2, G21, G3, G30

• Do Liquidity Proxies Measure Liquidity in Canadian Bond Markets?

  Staff Analytical Note 2017-23 Jean-Sébastien Fontaine, Jeffrey Gao, Jabir Sandhu, Kobe Wu

  This analytical note evaluates the reliability of proxies for measuring liquidity in Canadian bond markets. We find that price-impact and bid-ask proxies paint a similar picture of evolving liquidity conditions to that obtained from richer measures of liquidity for benchmark Government of Canada bonds.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Debt management, Financial markets JEL Code(s): G, G1, G12, G14, G2, G23, G3, G32

• Methodology for Assigning Credit Ratings to Sovereigns

  Staff Discussion Paper 2017-7 Philippe Muller, Jérôme Bourque

  The investment of foreign exchange reserves or other asset portfolios requires an assessment of the credit quality of investment counterparties. Traditionally, foreign exchange reserve and asset managers have relied on credit rating agencies (CRAs) as the main source for credit assessments.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Credit risk management, Foreign reserves management JEL Code(s): F, F3, F31, G, G2, G24, G28, G3, G32