The inexorable rise in corporate risk

Ev ery new crisis gives rise to an increase in the perception of corporate risk, which can be measured by the risk premium on listed equities or by the differential between the return on equity (RoE) and the risk-free long-term interest rate. After the COVID crisis, the perception of corporate risk will therefore be greater than after the subprime crisis. What consequences will this have? An increase in the cost of equity capital, and therefore greater use of debt leverage by companies and a slowdown in their investment; A transfer of savings into low-risk financial assets (government bonds, money market assets); The need for companies to provide a high return on equity to offset the higher risk premium, leading to a slowdown in wages, the search for monopoly rents and offshoring - the opposite of what public opinion wants today.