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Financial Pressure and Balance Sheet Adjustment by UK Firms

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  • Benito, Andrew

    (Bank of England)

  • Garry Young

Abstract

This paper examines the financial policies and balance sheet adjustment of companies. Using a large panel of UK firms, we estimate models for dividends, new equity issuance and investment, relating them to debt adjustment. The results suggest that while dividends are sticky in the short run, they are an important means of balance sheet adjustment in the long run. Other evidence supports the idea that companies actively target their balance sheet by variation in dividends, new equity issues and investment.

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Bibliographic Info

Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2002 with number 20.

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Date of creation: 29 Aug 2002
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Handle: RePEc:ecj:ac2002:20

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Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
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Web page: http://www.res.org.uk/society/annualconf.asp
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References

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Citations

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Cited by:
  1. Philip Bunn & Garry Young, 2004. "Corporate capital structure in the United Kingdom: determinants and adjustment," Bank of England working papers 226, Bank of England.
  2. Andrew Benito & John Whitley, 2003. "Implicit interest rates and corporate balance sheets: an analysis using aggregate and disaggregated UK data," Bank of England working papers 193, Bank of England.
  3. Andrew Benito & Ignacio Hernando, 2002. "Extricate: Financial Pressure and Firm Behaviour in Spain," Banco de Espa�a Working Papers 0227, Banco de Espa�a.
  4. Andrew Benito, 2003. "The capital structure decisions of firms: is there a pecking order?," Banco de Espa�a Working Papers 0310, Banco de Espa�a.
  5. von Kalckreuth, Ulf & Chirinko, Robert S. & Breitung, Jörg, 2003. "A Vectorautoregressive Investment Model (VIM) and Monetary Policy Transmission: Panel Evidence from German Firms," Discussion Paper Series 1: Economic Studies 2003,06, Deutsche Bundesbank, Research Centre.
  6. Peter Gibbard & Ibrahim Stevens, 2011. "Corporate debt and financial balance sheet adjustment: a comparison of the United States, the United Kingdom, France and Germany," Annals of Finance, Springer, vol. 7(1), pages 95-118, February.
  7. Andrew Benito, 2003. "The incidence and persistence of dividend omissions by Spanish firms," Banco de Espa�a Working Papers 0303, Banco de Espa�a.
  8. Marie Diron & Maria Cruz Manzano & Thomas Westermann, 2005. "Forecasting aggregate investment in the euro area: do indicators of financial conditions help?," BIS Papers chapters, in: Bank for International Settlements (ed.), Investigating the relationship between the financial and real economy, volume 22, pages 206-27 Bank for International Settlements.
  9. Albert Jaeger, 2003. "Corporate Balance Sheet Restructuring and Investment in the Euro Area," IMF Working Papers 03/117, International Monetary Fund.
  10. Alberto Jaramillo & Hermilson Velásquez & Javier Santiago Ortiz & Natalia Serna, 2003. "Aspectos teóricos y empíricos de la relación empresas bancos," DOCUMENTOS DE TRABAJO CIEF 003922, UNIVERSIDAD EAFIT.
  11. Andrew Benito, 2002. "Financial pressure, monetary policy effects and inventory adjustment by UK and Spanish firms," Banco de Espa�a Working Papers 0226, Banco de Espa�a.
  12. Hernando, Ignacio & Martínez-Carrascal, Carmen, 2008. "The impact of financial variables on firms' real decisions: Evidence from Spanish firm-level data," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 543-561, March.
  13. Ignacio Hernando & Carmen Martínez-Carrascal, 2003. "The impact of financial variables on firms' real decisions: evidence from Spanish firm-level data," Banco de Espa�a Working Papers 0319, Banco de Espa�a.
  14. Philip Bunn & Kamakshya Trivedi, 2005. "Corporate expenditures and pension contributions: evidence from UK company accounts," Bank of England working papers 276, Bank of England.

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