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Miss Roxana Mihet
This paper investigates the effects of national culture on firm risk-taking, using a comprehensive dataset covering 50,000 firms in 400 industries in 51 countries. Risk-taking is found to be higher for domestic firms in countries with low uncertainty aversion, low tolerance for hierarchical relationships, and high individualism. Domestic firms in such countries tend to take substantially more risk in industries which are more informationally opaque (e.g. finance, mining, IT). Risk-taking by foreign firms is best explained by the cultural norms of their country of origin. These cultural norms do not proxy for legal constraints, insurance safety nets, or economic development.
International Monetary Fund. European Dept.

compensation scheme in firms smaller than 250 employees. Firmsinsolvency regime will also be streamlined (through the introduction of cross class cram down in the regulatory framework). CICE (so far, a tax credit reducing the labor cost at the lower end of the wage distribution) will be transformed in a permanent cut in social contributions in order to enhance transparency as regards the effective tax wedge. Over the past decades, the tax wedge has continuously declined at the minimum wage level. Therefore, rather than comparing minimum wage (SMIC) to median wages

Mr. Peter Isard and Mr. Michael P. Dooley

relative prices that are the centerpiece of a move toward a market economy will make many existing firms insolvent. Moreover, banks and other firms will inherit a stock of claims on the insolvent firms that are worthless. It is hard to imagine conditions that create a worse incentive structure for a private capital market. The managers or owners of the insolvent firms have every incentive to cover operating losses by borrowing from the banks. The banks should say no to these requests, but banks that are already insolvent have nothing to lose by carrying the firm with

Mr. Federico J Diez, Mr. Romain A Duval, Jiayue Fan, Jose M Garrido, Sebnem Kalemli-Ozcan, Chiara Maggi, Mr. Maria Soledad Martinez Peria, and Mr. Nicola Pierri
The COVID-19 pandemic has increased insolvency risks, especially among small and medium enterprises (SMEs), which are vastly overrepresented in hard-hit sectors. Without government intervention, even firms that are viable a priori could end up being liquidated—particularly in sectors characterized by labor-intensive technologies, threatening both macroeconomic and social stability. This staff discussion note assesses the impact of the pandemic on SME insolvency risks and policy options to address them. It quantifies the impact of weaker aggregate demand, changes in sectoral consumption patterns, and lockdowns on firm balance sheets and estimates the impact of a range of policy options, for a large sample of SMEs in (mostly) advanced economies.
International Monetary Fund. Asia and Pacific Dept

prolonged would raise the risk of firm insolvency . A simple simulation illustrates the potential magnitude of liquidity shortfalls in NFCs in event of a recurrent shock resulting in a sharp fall in sales ( Box 2 ). Limited options to deal with liquidity shortfalls could impair the long-term viability of many firms. While the initial health of firms’ balance sheets is important, evidence also suggests that firms facing a high risk of liquidity shortages are mostly profitable and viable ( OECD 2020 ). The experience in New Zealand on the successful use of the wage subsidy

Mr. Daniel Garcia-Macia

,653 844,484 Sources: Orbis, IStat and Bank of Italy. Notes: Including firm and sector-year fixed effects. The sample excludes one-employee firms, insolvent, SOEs, non-market sectors, and winsorized. Age bin=2 includes firms between 5–9 years old, age bin=3 ages 10–15, etc. All variables are deflated. Standard errors are clustered at the firm level. Asterisks indicate statistical significance at the 10, 5, and 1 percent level respectively. The reported R 2 captures within firm fit. Multiplying the estimated coefficients of interest β ^ 2 by the

Mr. Peter Isard and Mr. Michael P. Dooley
This note addresses various types of incentives that must be established before a market economy can function effectively. It also argues that the enormous challenge of restructuring large industrial enterprises or reabsorbing their workers, while appropriately based on market signals, cannot be accomplished by the market alone. Some type of planning will eventually be required. Ideally, such planning should receive high priority from the outset with clear recognition that durable macroeconomic stabilization will be very difficult to achieve in a democratic political system until the large state enterprises have been successfully transformed or their workers reabsorbed.