Extricate: Financial Pressure and Firm Behaviour in Spain
AbstractThis paper examines financial pressure facing Spanish companies. A number of stylised facts regarding the financial performance and financing decisions of Spanish firms are first presented for the period 1985-2000 using repeated annual cross-sections of around 5,000 manufacturing and retail firms. (i) In periods of general financial fragility, most notably during the recession of 1993, the experience of the most financially vulnerable companies is even more distressed than movements in aggregate or average figures would suggest (ii) the burden of borrowing costs has declined for most companies in the mid-/late-1990s, but particularly for those at the top of the distribution (iii) the cross-sectional distribution of indebtedness across firms has remained remarkably stable but (iv) this conceals significant variation in debt ratios for individual firms. Using panel data methods, the effects of financial pressure associated with servicing debt on a number of aspects of corporate behaviour are then examined, namely fixed investment, employment (both permanent and temporary), inventories and dividend policies. Our results quantify the responsiveness of each of these responses to financial pressure experienced by firms in Spain. Quantitatively large effects of financial pressure on investment and employment are estimated, although these work through more quickly in the case of fixed investment. The effects on employment are found to be larger and work through more quickly in the case of temporary than permanent employment. We also find significant effects on inventory investment and dividend payments confirming these additional mechanisms of adjustment by companies in Spain in resp onse to financial pressure.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0227.
Length: 30 pages
Date of creation: Nov 2002
Date of revision:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ramey, Valerie A. & West, Kenneth D., 1999.
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 13, pages 863-923
- Richard Blundell & Steve Bond, 1995.
"Initial conditions and moment restrictions in dynamic panel data models,"
IFS Working Papers
W95/17, Institute for Fiscal Studies.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Juan J Dolado & Carlos Garcia--Serrano & Juan F. Jimeno, 2002.
"Drawing Lessons From The Boom Of Temporary Jobs In Spain,"
Royal Economic Society, vol. 112(721), pages F270-F295, June.
- Dolado, Juan J. & Garcia-Serrano, Carlos & Jimeno, Juan Francisco, 2001. "Drawing Lessons From the Boom of Temporary Jobs in Spain," CEPR Discussion Papers 2884, C.E.P.R. Discussion Papers.
- Dolado, Juan José & García-Serrano, Carlos & Jimeno, Juan F., . "Drawing Lessons from the Boom of Temporary Jobs in Spain," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/3263, Universidad Carlos III de Madrid.
- Guariglia, Alessandra, 1999.
"The Effects of Financial Constraints on Inventory Investment: Evidence from a Panel of UK Firms,"
London School of Economics and Political Science, vol. 66(261), pages 43-62, February.
- Alessandra Guariglia, . "The Effects of Financial Constraints on Inventory Investment: Evidence from a Panel of UK Firms," Economics Discussion Papers 462, University of Essex, Department of Economics.
- Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988.
"Financing Constraints and Corporate Investment,"
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
- Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
- Alan J. Auerbach & Kevin A. Hassett, 2000.
"On the Marginal Source of Investment Funds,"
NBER Working Papers
7821, National Bureau of Economic Research, Inc.
- Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
- Kashyap, Anil K & Lamont, Owen A & Stein, Jeremy C, 1994.
"Credit Conditions and the Cyclical Behavior of Inventories,"
The Quarterly Journal of Economics,
MIT Press, vol. 109(3), pages 565-92, August.
- Anil K. Kashyap & Owen A. Lamont & Jeremy C. Stein, 1993. "Credit conditions and the cyclical behavior of inventories," Working Paper Series, Macroeconomic Issues 93-7, Federal Reserve Bank of Chicago.
- Alan S. Blinder & Louis J. Maccini, 1991. "Taking Stock: A Critical Assessment of Recent Research on Inventories," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 73-96, Winter.
- Steven A. Sharpe, 1993.
"Financial market imperfections, firm leverage and the cyclicality of employment,"
Finance and Economics Discussion Series
93-10, Board of Governors of the Federal Reserve System (U.S.).
- Sharpe, Steven A, 1994. "Financial Market Imperfections, Firm Leverage, and the Cyclicality of Employment," American Economic Review, American Economic Association, vol. 84(4), pages 1060-74, September.
- Andrew Benito & Garry Young, 2002.
"Financial pressure and balance sheet adjustment by UK firms,"
Bank of England working papers
168, Bank of England.
- Andrew Benito & Garry Young, 2002. "Financial Pressure and Balance Sheet Adjustment by UK Firms," Banco de Espaï¿½a Working Papers 0209, Banco de Espa�a.
- Benito, Andrew & Garry Young, 2002. "Financial Pressure and Balance Sheet Adjustment by UK Firms," Royal Economic Society Annual Conference 2002 20, Royal Economic Society.
- Robert E. Carpenter & Steven M. Fazzari & Bruce C. Petersen, 1994. "Inventory (Dis)Investment, Internal Finance Fluctuations, and the Business Cycle," Macroeconomics 9401001, EconWPA.
- Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Arulampalam, W., 1998. "A Note on Estimated Coefficients in Random Effects Probit Models," The Warwick Economics Research Paper Series (TWERPS) 520, University of Warwick, Department of Economics.
- Nickell, Stephen & Nicolitsas, Daphne & Dryden, Neil, 1997.
"What makes firms perform well?,"
European Economic Review,
Elsevier, vol. 41(3-5), pages 783-796, April.
- Andrew Benito & Garry Young, 2001.
"Hard Times or Great Expectations?: Dividend omissions and dividend cuts by UK firms,"
Bank of England working papers
147, Bank of England.
- Andrew Benito & Garry Young, 2003. "Hard Times or Great Expectations? Dividend Omissions and Dividend Cuts by UK Firms," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 531-555, December.
- Benito, Andrew & Garry Young, 2002. "Hard Times or Greatr Expectations?: Dividend Omissions and Dividend Cuts by UK Firms," Royal Economic Society Annual Conference 2002 21, Royal Economic Society.
- 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.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Ben S. Bernanke & John Y. Campbell, 1988. "Is There a Corporate Debt Crisis?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 83-140.
- Arturo Galindo & Alejandro Izquierdo & José M. Montero, 2006.
"Real exchange rates, dollarization and industrial employment in Latin America,"
Banco de Espaï¿½a Working Papers
0601, Banco de Espa�a.
- Galindo, Arturo & Izquierdo, Alejandro & Montero, Jose Manuel, 2007. "Real exchange rates, dollarization and industrial employment in Latin America," Emerging Markets Review, Elsevier, vol. 8(4), pages 284-298, December.
- Arturo Galindo & Alejandro Izquierdo & José Manuel Montero, 2006. "Real Exchange Rates, Dollarization and Industrial Employment in Latin America," Research Department Publications 4478, Inter-American Development Bank, Research Department.
- Paloma López-García & José Manuel Montero & Enrique Moral-Benito, 2012. "Business cycles and investment in intangibles: evidence from Spanish firms," Banco de Espaï¿½a Working Papers 1219, Banco de Espa�a.
- Andrew Benito, 2003. "The capital structure decisions of firms: is there a pecking order?," Banco de Espaï¿½a Working Papers 0310, Banco de Espa�a.
- Ignacio Hernando & Carmen Martínez-Carrascal, 2003. "The impact of financial variables on firms' real decisions: evidence from Spanish firm-level data," Banco de Espaï¿½a Working Papers 0319, Banco de Espa�a.
- López Martín, Mª Del Carmen & Rodero Franganillo, Adolfo, 2005. "Los activos de las instituciones de inversión colectiva de carácter financiero/Assets by Financial Institutions for Collective Investment," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 23, pages 93-124, Abril.
- Ignacio Hernando & Carmen Martínez-Carrascal, 2005. "The impact of financial variables on firms’ real decisions: evidence from Spanish firm-level data," BIS Papers chapters, in: Bank for International Settlements (ed.), Investigating the relationship between the financial and real economy, volume 22, pages 40-63 Bank for International Settlements.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mar�a Beiro. Electronic Dissemination of Information Unit. Research Department. Banco de Espa�a).
If references are entirely missing, you can add them using this form.