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Financial Pressure and Balance Sheet Adjustment by Firms

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  • Andrew Benito
  • Garry Young

Abstract

This paper examines the financial policies and balance sheet adjustment of companies. Using a large panel of UK-listed firms we consider how companies resolve pressures on their balance sheet, estimating models for dividends, new equity issuance and investment. The results indicate that companies resolve balance sheet pressures by each of these means. Financial policies, through dividends and new equity issuance, and real investment decisions, respond to the underlying level of debt and the borrowing cost of servicing that debt. Dividends are estimated to be slow to adjust in the short run. Copyright 2007 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics and Statistics.

Volume (Year): 69 (2007)
Issue (Month): 5 (October)
Pages: 581-602

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Handle: RePEc:bla:obuest:v:69:y:2007:i:5:p:581-602

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Cited by:
  1. Hongfei Zhu, 2009. "The Relationship Between Investment and Fund Raising: An Empirical study to Japanese Manufacturing Firms," Economics Bulletin, AccessEcon, vol. 29(1), pages 357-367.
  2. Arturo Galindo & Alejandro Izquierdo & José M. Montero, 2006. "Real exchange rates, dollarization and industrial employment in Latin America," Banco de Espa�a Working Papers 0601, Banco de Espa�a.
  3. Douglas Sutherland & Peter Hoeller, 2012. "Debt and Macroeconomic Stability: An Overview of the Literature and Some Empirics," OECD Economics Department Working Papers 1006, OECD Publishing.
  4. Görg, Holger & Spaliara, Marina-Eliza, 2013. "Export market exit, financial pressure and the crisis," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9599, C.E.P.R. Discussion Papers.
  5. Mawuli Segnon & Thomas Lux, 2013. "Multifractal Models in Finance: Their Origin, Propterties, and Applications," Kiel Working Papers 1860, Kiel Institute for the World Economy.
  6. Axel A Weber & Rafael Gerke & Andreas Worms, 2009. "Has the monetary transmission process in the euro area changed? Evidence vased on VAR estimates," BIS Working Papers 276, Bank for International Settlements.

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