The effect of International Monetary Fund programs on corporate default risk

This study evaluates the economic impact of International Monetary Fund (IMF) assistance programs through documenting the effect of such programs on corporate default risk in 20 countries over the 1995-2012 period. Using firm-level expected default frequency metrics from Moody's KMV and an event study style approach we show that IMF assistance is associated with an abnormal increase in corporate default risk in the 12 months prior to and subsequent to announcements of IMF intervention. Our findings are robust to control for endogeneity and thus call into question, from a new perspective, the immediate and long term economic impact of IMF assistance programs.