The impact of the credit crunch is likely to be seen on corporate balance sheets for some time, says Oxford Analytica.
Excerpts from Corporate caution hampers investment (Premium)
While recovery from the financial crisis has been slow in most advanced economies, and recovery in employment has lagged even further, corporate balance sheets are more robust. Sitting on cash (or liquid assets) reported at close to 2 trillion dollars in the United States alone, the corporate sector has potential to boost investment, job creation and growth.
Uncertainty about the speed of recovery, concerns over liabilities and potential for credit markets to freeze again mean that firms in advanced economies probably will maintain a cautious stance. Thus investment is likely to be restrained — except in the most dynamic sectors of the economy.
However, in emerging markets, while efforts to rein in credit may over the short-run encourage companies to build up cash balances to fund investment, in the longer term the development of financial markets should reduce their need to hold cash.