Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322472 
Year of Publication: 
2025
Series/Report no.: 
Bank of Canada Staff Discussion Paper No. 2025-10
Publisher: 
Bank of Canada, Ottawa
Abstract: 
Assessing insolvency dynamics is essential for evaluating the financial health of nonfinancial corporations and mitigating macroeconomic and financial stability risks. This study leverages a newly created Statistics Canada dataset linking insolvency records with firm-level financial data to develop a robust framework for monitoring insolvency risk. We employ two complementary approaches: a univariate threshold method that establishes critical financial ratio benchmarks and a multivariate econometric model that accounts for interactions among financial indicators. These methods produce debt-at-risk measures that enhance risk assessment by combining simplicity with analytical depth. Finally, we apply these metrics to timely firm-level data, enabling continual monitoring of financial vulnerabilities.
Subjects: 
Credit and credit aggregates
Econometric and statistical methods
Financial stability
Firm dynamics
JEL: 
D22
G33
L20
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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