Coricelli, Fabrizio, Driffield, Nigel, Pal, Sarmistha and Roland, Isabelle (2012) When does leverage hurt productivity growth? A firm-level analysis. Journal of International Money and Finance. ISSN 0261-5606
Full text not available from this repository.Abstract
In the wake of the global financial crisis, several macroeconomic contributions have highlighted the risks of excessive credit expansion. In particular, too much finance can have a negative impact on growth. We examine the microeconomic foundations of this argument, positing a non-monotonic relationship between leverage and firm-level productivitygrowth in the spirit of the trade-off theory of capital structure. A threshold regression model estimated on a sample of Central and Eastern European countries confirms that TFP growth increases with leverage until the latter reaches a critical threshold beyond which leverage lowers TFP growth. This estimate can provide guidance to firms and policy makers on identifying “excessive” leverage. We find similar non-monotonic relationships between leverage and proxies for firm value. Our results are a first step in bridging the gap between the literature on optimal capital structure and the wider macro literature on the finance-growth nexus.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.journals.elsevier.com/journal-of-intern... |
| Additional Information: | © 2012 Elsevier B.V. |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HB Economic Theory |
| JEL classification: | G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance |
| Date Deposited: | 08 May 2012 12:19 |
| Last Modified: | 12 Dec 2024 00:07 |
| URI: | http://eprints.lse.ac.uk/id/eprint/43514 |
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