個案資料

When it comes to new government budgets, politicians are usually criticized regardless of whether they undertake new spending or embrace austerity. Canadian Finance Minister Joe Oliver’s spending restraint should be appreciated, however, at a time when world debt has jumped $57 trillion since the so-called Age of Austerity started in 2007, with governments accounting for $25 trillion of the extra liabilities. Oliver has been criticized for his plans to cut the small business tax rate, because the move will widen the gap between what small businesses and large businesses pay in taxes and will possibly incentivize businesses to stay small. But new research discussed in this article shows that a nation’s strongest, largest companies get hit with a lower rating after a sovereign downgrade faster and more often than firms with ratings that are worse than that of the state. This asymmetric effect leads to a greater reduction in investment for a nation’s healthiest firms, while also increasing their cost of capital by pushing up their bond yields. In light of these findings, this article argues that companies big and small stand to benefit from Canada’s return to surplus under Joe Oliver.

• Sovereign debt crisis
• corporate credit
• debt rating
• budgeting
• Canadian budget
• Global Financial Crisis
• IBJ Insights