Do Phoenix Miracles Exist? Firm-Level Evidence from Financial Crises

This paper provides empirical evidence on firm recoveries from financial system collapses in developing countries (systemic sudden stops episodes), and compares them with the experience in the United States in the 2008 financial crisis. Prior research found that economies recover from systemic sudden stop episodes before the financial sector. These recoveries are called Phoenix miracles, and the research questioned the role of the financial system in recovery. Although an average of the macro data across a sample of systemic sudden stop episodes over the 1990s appears consistent with the notion of Phoenix recoveries, closer inspection reveals heterogeneity of responses across the countries, with only a few countries fitting the pattern. Micro data show that across countries, only a small fraction (less than 31 percent) of firms follow a pattern of recovery in sales without a recovery in external credit, and even these firms have access to external sources of cash. The experience of firms in the United States during the 2008 financial crisis also suggests no evidence of credit-less recoveries. An examination of the dynamics of firms' financing, investment and payout policies during recovery periods shows that far from being constrained, the firms in the sample are able to access long-term financing, issue equity, and significantly expand their cash holdings.

Bibliographic Details

Main Authors:	Ayyagari, Meghana, Demirgüç-Kunt, Asli, Maksimovic, Vojislav
Format:	Policy Research Working Paper biblioteca
Language:	English
Published:	2011-09-01
Subjects:	ABSENCE OF CREDIT, ACCESS TO CREDIT, ACCOUNTING, ADMINISTRATIVE EXPENSES, AMORTIZATION, ASSET SALES, ASSET STRUCTURE, BALANCE SHEET, BALANCE-SHEET, BANK CREDIT, BANK LENDING, BANKING CRISES, BANKRUPT, BENCHMARK, BOND INDEX, BORROWINGS, BROKERS, CAPITAL FLOW, CAPITAL FLOWS, CAPITAL MARKETS, CAPITAL STOCK, CAPITAL STRUCTURE, CASH BALANCE, CASH BALANCES, CASH DIVIDENDS, CASH FLOW, CASH FLOWS, CASH HOLDINGS, CASH OUTFLOWS, CHECKS, COMMERCIAL BANKS, COMMERCIAL INCOME, COMMON STOCK, CONSUMER LOANS, CORPORATE DEBT, CORPORATE INVESTMENT, CORPORATE PROFITS, CREDIT CRUNCH, CREDIT CRUNCHES, CREDIT LEVELS, CREDIT LINES, CREDIT MARKETS, CRISIS COUNTRY, CURRENCY, CURRENCY CRISES, DEBT, DEBT FINANCING, DEBT ISSUANCE, DEBT MATURITY, DEBT POSITIONS, DECISION MAKING, DEPENDENT, DEPOSIT, DEPOSIT MONEY BANKS, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DIVIDEND, DIVIDEND PAYMENTS, DIVIDENDS, DOLLAR DEBT, EARNINGS, EARNINGS BEFORE INTEREST, ECONOMIC ACTIVITY, ECONOMIC OUTLOOK, ECONOMIC POLICY, EMERGING ECONOMIES, EMERGING MARKET, EMERGING MARKET BOND, EMERGING MARKET COUNTRIES, EMERGING MARKET FIRMS, EMERGING MARKETS, EQUIPMENT, EQUITY ISSUANCE, EQUITY ISSUANCES, EQUITY ISSUES, EXPENDITURE, EXPENDITURES, EXTERNAL BORROWING, EXTERNAL CREDIT, EXTERNAL FINANCE, EXTERNAL FINANCING, FEDERAL RESERVE, FEDERAL RESERVE BANK, FINANCIAL CONSTRAINTS, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DISTRESS, FINANCIAL MARKET, FINANCIAL MARKETS, FINANCIAL RESOURCES, FINANCIAL SECTOR, FINANCIAL SERVICES, FINANCIAL SHOCK, FINANCIAL STATEMENTS, FINANCIAL STUDIES, FINANCIAL SYSTEM, FINANCING COSTS, FIRM SALES, FIXED ASSETS, FORECASTS, FOREIGN EXCHANGE, GDP, GDP DEFLATOR, GLOBAL CAPITAL, GLOBAL CAPITAL MARKET, GROWTH OPPORTUNITIES, INCOME STATEMENT, INCOME STATEMENTS, INDIVIDUAL FIRM, INDIVIDUAL FIRMS, INDUSTRIAL LOANS, INSURANCE, INTERNATIONAL BANK, INTERNATIONAL FINANCIAL STATISTICS, INVENTORIES, INVENTORY, INVESTING, INVESTMENT CASH FLOW SENSITIVITIES, INVESTMENT DECISIONS, INVESTMENT OPPORTUNITIES, INVESTMENT PATTERNS, INVESTMENT-CASH FLOW SENSITIVITIES, ISSUANCE, LEVERAGE, LIMITED ACCESS, LIQUIDITY, LIQUIDITY CRUNCH, LIQUIDITY MANAGEMENT, LOCAL CURRENCY, LONG TERM FINANCING, LONG-TERM BORROWING, LONG-TERM BORROWINGS, LONG-TERM DEBT, LONG-TERM DEBT MARKET, LONG-TERM DEBT MARKETS, LONG-TERM INVESTMENTS, MARKET INTEGRATION, MARKET RISK, MATURITY MISMATCH, MERGER, MERGERS, MICRO DATA, NATIONAL INCOME, NET CAPITAL, OUTPUT, OVERDRAFTS, POSITIVE COEFFICIENT, PRIVATE CREDIT, PRIVATE SECTOR BANK, PRIVATE SECTOR CREDIT, PRIVATE SECTOR DEVELOPMENT, PROFITABILITY, PUBLIC POLICY, REAL ECONOMIC ACTIVITY, REAL ESTATE, REAL ESTATE LOANS, REAL GDP, RECESSION, RECESSIONS, RECOVERY PERIOD, RECOVERY PERIODS, RESOLUTION MECHANISMS, RETURN, RETURNS, SALE OF INVESTMENTS, SALE OF PROPERTY, SAVINGS, SECURITIES, SELF-FINANCING, SHAREHOLDER, SHORT TERM BORROWING, SHORT TERM BORROWINGS, SHORT TERM CREDIT, SHORT-TERM BORROWING, SHORT-TERM DEBT, SHORT-TERM DEBTS, SHORT-TERM FINANCING, SOURCES OF CREDIT, STOCK ISSUANCE, STOCK ISSUANCES, STOCK OPTIONS, SYSTEMIC BANKING CRISES, SYSTEMIC CRISES, TERM CREDIT, TRANSITION ECONOMIES, TROUGH, VALUE ADDED, WAGES, WARRANTS, WORKING CAPITAL, WORLD DEVELOPMENT INDICATORS,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110919161453 http://hdl.handle.net/10986/3563
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