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Excess Leverage and Productivity Growth in Emerging Economies: Is There A Threshold Effect?

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  • Coricelli, Fabrizio
  • Driffield, Nigel
  • Pal, Sarmistha
  • Roland, Isabelle

Abstract

This paper studies the relationship between leverage and growth, focusing on a large sample of firms in emerging economies of central and eastern Europe (CEE). Contrary to the general wisdom, we find that deviation from optimal leverage, especially excess leverage, is common among firms in many CEE countries. Using firm-level panel data, the paper provides support to the hypothesis that leverage positively affects productivity growth but only below an endogenously determined threshold level.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7617.

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Date of creation: Dec 2009
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Handle: RePEc:cpr:ceprdp:7617

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Keywords: Excess Leverage; TFP growth; Threshold model;

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References

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Citations

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Cited by:
  1. Brown, Martin & Lane, Philip R., 2011. "Debt overhang in emerging Europe ?," Policy Research Working Paper Series 5784, The World Bank.
  2. Maria Gonzalez, 2012. "Nonfinancial Firms in Latin America: A Source of Vulnerability?," IMF Working Papers 12/279, International Monetary Fund.
  3. Sebnem Kalemli-Ozcan & Bent Sorensen & Sevcan Yesiltas, 2011. "Leverage Across Firms, Banks, and Countries," NBER Working Papers 17354, National Bureau of Economic Research, Inc.
  4. Manuela Goretti & Marcos Souto, 2013. "Macro-Financial Implications of Corporate (De)Leveraging in the Euro Area Periphery," IMF Working Papers 13/154, International Monetary Fund.
  5. Antoine Godin & Stephen Kinsella, 2012. "Leverage, liquidity and crisis: A simulation study," ASSRU Discussion Papers 1205, ASSRU - Algorithmic Social Science Research Unit.
  6. Leandro Medina, 2012. "Spring Forward or Fall Back? The Post-Crisis Recovery of Firms," IMF Working Papers 12/292, International Monetary Fund.

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