The impact of financial position on investment: an analysis for non-financial corporations in the euro area

Carmen Martínez-Carrascal () and Annalisa Ferrando ()
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Carmen Martínez-Carrascal: Banco de España
Authors registered in the RePEc Author Service: Carmen Martinez Carrascal

No 820, Working Papers from Banco de España

Abstract: This paper analyses the impact that firms' financial position has on investment decisions using panel data from a large sample of non-financial corporations (around 120,000 firms) in six euro area countries (Belgium, Germany, France, Italy, the Netherlands and Spain). The results indicate that financial position is important to explain capital expenditures, as financial pressure appears relevant in explaining investment dynamics when it is proxied by cash flow, indebtedness and debt burden. The results also show differences in the sensitivity of investment rates to changes in financial pressure across countries, which appears to be especially large in the Netherlands and Italy and relatively small in Germany.

Keywords: financial pressure; fixed investment; balance sheet channel; panel data (search for similar items in EconPapers)
JEL-codes: C33 E22 G32 J23 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2008-09
New Economics Papers: this item is included in nep-bec, nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/08/Fic/dt0820e.pdf First version, September 2008 (application/pdf)

Related works:
Working Paper: The impact of financial position on investment: an anlysis for non-financial corporations in the euro area (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0820

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