G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

• Assessing Climate-Related Financial Risk: Guide to Implementation of Methods

  Technical Report No. 120 Hossein Hosseini, Craig Johnston, Craig Logan, Miguel Molico, Xiangjin Shen, Marie-Christine Tremblay

  A pilot project on climate transition scenarios by the Bank of Canada and the Office of the Superintendent of Financial Institutions assessed climate-related credit and market risks. This report describes the project’s methodologies and provides guidance on implementing them.

  Content Type(s): Staff research, Technical reports Topic(s): Climate change, Credit and credit aggregates, Econometric and statistical methods, Financial stability JEL Code(s): C, C5, C53, C8, C83, G, G1, G3, G32

• Updated Methodology for Assigning Credit Ratings to Sovereigns

  Staff Discussion Paper 2021-16 Karim McDaniels, Nico Palesch, Sanjam Suri, Zacharie Quiviger, John Walsh

  We update the Bank of Canada’s credit rating methodology for sovereigns, including our approach to assessing their fiscal position and monetary policy flexibility. We also explicitly consider climate-related factors.

  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

• A Q-Theory of Banks

  Staff Working Paper 2021-44 Juliane Beganau, Saki Bigio, Jeremy Majerovitz, Matías Vieyra

  Using stock market data on banks, we show that the book value of loans recognizes losses with a delay. This delayed accounting is important for regulation because the requirements regulators impose are based on book values.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): E, E4, E44, G, G2, G21, G3, G32, G33

• COVID-19’s impact on the financial health of Canadian businesses: An initial assessment

  Staff Analytical Note 2021-8 Timothy Grieder, Mikael Khan, Juan Ortega, Callie Symmers

  Despite COVID-19 challenges, bold policy measures in Canada have helped businesses manage cash flow pressures and kept insolvency filings low. But the impact of the pandemic has been uneven, and the financial health of some firms may further deteriorate over the next year.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Coronavirus disease (COVID-19), Credit and credit aggregates, Financial stability, Firm dynamics, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): G, G3, G31, G32, G33, G38

• Corporate investment and monetary policy transmission in Canada

  Staff Analytical Note 2020-26 Min Jae Kim, Jonathan Witmer

  Unexpected changes in interest rates lead small firms to materially change their investment rate. Large firms, in contrast, show a smaller response. This suggests both that financial conditions are an important channel for transmitting monetary policy and that firm characteristics can help us better understand fluctuations in business investment.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Firm dynamics, Monetary policy, Monetary policy transmission JEL Code(s): D, D2, D22, D9, D92, G, G3, G31, G32

• Outside Investor Access to Top Management: Market Monitoring versus Stock Price Manipulation

  Staff Working Paper 2020-43 Josef Schroth

  Should managers be paid in stock options if they provide stock-market participants with information about the firm? This paper studies how firm owners trade off the benefit of stock-price incentives and better-informed market participants against the cost of potential stock-price manipulation.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial markets, Recent economic and financial developments JEL Code(s): D, D8, D82, D86, G, G1, G14, G3, G32, G34, M, M1, M12, M4, M41

• The Canadian corporate investment gap

  Staff Analytical Note 2020-19 Chris D'Souza, Timothy Grieder, Daniel Hyun, Jonathan Witmer

  Business investment has been lower than expected in Canada and abroad since the financial crisis of 2007–09. This corporate investment gap is mirrored in firms’ other financing decisions, as they have increased cash holdings and dividend payments and decreased issuance of debt and equity.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Firm dynamics, Monetary policy transmission JEL Code(s): D, D2, D22, D9, D92, G, G3, G31, G32

• The potential effect of a central bank digital currency on deposit funding in Canada

  Staff Analytical Note 2020-15 Alejandro García, Bena Lands, Xuezhi Liu, Joshua Slive

  A retail central bank digital currency denominated in Canadian dollars could, in theory, create competition for bank deposit funding.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Digital currencies and fintech, Financial institutions, Financial stability JEL Code(s): E, E4, E41, E44, E5, G, G1, G10, G17, G2, G21, G3, G32, O

• Identifying Aggregate Shocks with Micro-level Heterogeneity: Financial Shocks and Investment Fluctuation

  Staff Working Paper 2020-17 Xing Guo

  This paper identifies aggregate financial shocks and quantifies their effects on business investment based on an estimated DSGE model with firm-level heterogeneity. On average, financial shocks contribute only 3% of the variation in U.S. public firms’ aggregate investment.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Firm dynamics JEL Code(s): E, E1, E12, E2, E22, G, G3, G31, G32

• A Financial Stability Analysis of Zombie Firms in Canada

  Staff Analytical Note 2020-3 Timothy Grieder, Juan Ortega

  We measure the prevalence of zombie firms in Canada and assess how they could potentially affect the financial system.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Credit and credit aggregates, Financial stability, Sectoral balance sheet JEL Code(s): G, G3, G32