Business cycles, interest rates, and credit conditions are intricately connected and influence corporate debt management. Corporates manage debt and liquidity across business cycles by adjusting debt refinancing needs, capital expenditure, and discretionary spending such as dividends, share buybacks, and M&As.
During economic expansion, companies have robust profitability and cash flows supported by healthy demand, making it relatively easy for the companies to service their debts. In this phase, corporates increase dividends, refinance existing debt or raise new debts at low rates, pursue M&As, undertake new investments, and even choose to deleverage voluntarily. Conversely, during economic downturns or recessions, companies experience…
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