Measured by assessing firms that are vulnerable from being highly
leveraged (extent of the use of borrowed funds) and committed to
extensive lending without a sufficient cushion of capital. Excessive
debt may force an organisation to cut investment and renegotiate
with creditors and in severe cases commit credit default. The study
states: “A financially distressed firm’s default can lead to the
distress of its lenders, and subsequently impact on other firms, thus
potentially increasing the build-up of systemic risk across the
financial system.”