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An Empirical Analysis of the External Finance Premium of Public Non-Financial Corporations in Brazil

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  • Fernando N. de Oliveira
  • Alberto Ronchi Neto
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    Abstract

    Our objective in this paper is to analyze empirically the relationship between the external finance premium of non-financial corporations in Brazil with their default probability and with their demand for inventories. As for the former relation, we find that corporations that have greater external finance premium have greater probability of default. As for the latter, we find that the external finance premium is positive and statistically significantly correlated. The results confirm previous results of the literature that indicate that the balance sheet channel of monetary policy is relevant in Brazil.

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    File URL: http://www.bcb.gov.br/pec/wps/ingl/wps255.pdf
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    Bibliographic Info

    Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 255.

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    Date of creation: Nov 2011
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    Handle: RePEc:bcb:wpaper:255

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    Web page: http://www.bcb.gov.br/?english

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    9. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    10. Gilchrist, S. & Himmelberg, C.P., 1995. "Evidence on the Role of Cash Flow for Investment," Papers 95-29, Columbia - Graduate School of Business.
    11. Frederic S. Mishkin, 1995. "Symposium on the Monetary Transmission Mechanism," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 3-10, Fall.
    12. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
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