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Foreword -- Abstract -- Acknowledgments -- Summary -- Introduction -- 1. Economic value of the corporate sector -- 2. Corporate sector vulnerability -- 3. Corporate sector vulnerability and link to banking crises and recapitalization costs -- 4. Potential applications -- Annex 1: EVA and valuation approaches using corporate financial data at the firm and sector level -- Annex 2: Weighted average cost of capital (WACC) and capital asset pricing model in emerging markets -- Annex 3: Graphs and corporate sector data in Indonesia -- Notes -- References.

This paper presents an innovative yet practical framework to assess corporate sector vulnerability and the links to exchange rates and financial crises that bridges the gap between corporate finance and macroeconomic analysis. This framework provides a " missing link " describing how changes in aggregate value of the corporate sector are interrelated with exchange rate crises, financial crises, and associated fiscal costs of bank recapitalization. The factors that can make the corporate sector particularly vulnerable include both sector-specific characteristics (leverage, composition of debt, maturity of debt, hard currency profits, etc.) and characteristics of the current account adjustment process that feed back on corporate balance sheets. The framework has multiple applications. It can help policy makers and investors understand past crises and assess risks of future crises. It can also help improve surveillance as well as improve policy design at the macroeconomic, financial, and corporate sector levels.