Abstract: This chapter assesses the causes and implications of trends up to the early 1990s in debt and default in the corporate sectors of the major OECD countries, namely the USA, UK, Canada, Germany, Japan, and France. The data show a sharp rise in defaults in the Anglo-Saxon countries and France over the 1980s, which is echoed only partially in Germany and in Japan. These patterns in turn can be related to changes in corporate indebtedness, modified by the nature of financial systems; the main reasons for such shifts are examined. The chapter is structured as follows; the first section presents balance-sheet data for the corporate sector in the six countries. The second offers an outline of theories of corporate debt and balance-sheet structure as presented in the literature, in particular, as they relate to default. The third probes the nature of default, its costs, and implications. The analysis of this section has broader applications to both households and financial institutions. The fourth and fifth sections interpret empirical patterns (levels and changes in leverage) in the light of theory, while the sixth seeks to estimate the empirical relationship between debt and default. Interim conclusions are drawn and some policy implications are suggested in the final section.

Keywords: balance sheets, corporate debt, corporate sector, debt, default, leverage, OECD countries, policy,