THE SYSTEMIC RISK OF INCREASED DEBT ON CORPORATE BALANCE SHEETS DURING THE NEXT RECESSION

Open Access
Author:
Merigliano, Troy Dominic
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Brian Davis, Thesis Supervisor
  • Brian Davis, Honors Advisor
Keywords:
  • Debt
  • Great Recession
  • Corporate Debt
  • Stress Test
Abstract:
This paper analyzes whether a systemic economic threat exists due to companies issuing too much debt in the years following the Great Recession. It utilizes a stress test similar to that of the Federal Reserve where a selection of companies across five sectors are subjected to a variety of hypothetical recessions with severities relative to the Great Recession. The analysis found that no individual sector poses a major threat, but certain sectors are more likely than others to be distressed during the next recession thus increasing their likelihoods of causing widespread damage to the economy.