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What can company data tell us about financing and investment decisions?

Author

Listed:
  • Farrant, Katie

    () (Bank of England)

  • Inkinen, Mika

    () (Bank of England)

  • Rutkowska, Magda

    () (Bank of England)

  • Theodoridis, Konstantinos

    () (Bank of England)

Abstract

Capital markets play an important role in financing UK companies. Since 2009, corporate bond issuance has been strong, and yet aggregate UK business investment has remained weak. In part, this pattern of company behaviour can be explained by companies choosing to issue bonds in order to reduce other forms of debt, such as bank loans. But company-level data show that there is considerable heterogeneity in companies’ investment behaviour. Companies that use capital markets have increased their investment significantly since the trough in 2009. Their investment growth, however, fell in 2012, suggesting that other factors besides access to finance were also influencing companies’ investment decisions at the time.

Suggested Citation

  • Farrant, Katie & Inkinen, Mika & Rutkowska, Magda & Theodoridis, Konstantinos, 2013. "What can company data tell us about financing and investment decisions?," Bank of England Quarterly Bulletin, Bank of England, vol. 53(4), pages 361-370.
  • Handle: RePEc:boe:qbullt:0123
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    File URL: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2013/what-can-company-data-tell-us-about-financing-and-investment-decisions.pdf?la=en&hash=FDBA179B3A3D7508236F6E212B5665A2076B568B
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    References listed on IDEAS

    as
    1. Michael A. S. Joyce & Nick McLaren & Chris Young, 2012. "Quantitative easing in the United Kingdom: evidence from financial markets on QE1 and QE2," Oxford Review of Economic Policy, Oxford University Press, vol. 28(4), pages 671-701, WINTER.
    2. Simon Gilchrist & Egon Zakrajsek, 2007. "Investment and the Cost of Capital: New Evidence from the Corporate Bond Market," NBER Working Papers 13174, National Bureau of Economic Research, Inc.
    3. George Kapetanios & Haroon Mumtaz & Ibrahim Stevens & Konstantinos Theodoridis, 2012. "Assessing the Economy‐wide Effects of Quantitative Easing," Economic Journal, Royal Economic Society, vol. 122(564), pages 316-347, November.
    4. Joyce, Michael & Tong, Matthew & Woods, Robert, 2011. "The United Kingdom’s quantitative easing policy: design, operation and impact," Bank of England Quarterly Bulletin, Bank of England, vol. 51(3), pages 200-212.
    5. Pattani, Aashish & Vera, Giuseppe & Wackett , James, 2011. "Going public: UK companies’ use of capital markets," Bank of England Quarterly Bulletin, Bank of England, vol. 51(4), pages 319-330.
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    Cited by:

    1. Boneva, L. & Linton, O., 2017. "A Discrete Choice Model For Large Heterogeneous Panels with Interactive Fixed Effects with an Application to the Determinants of Corporate Bond Issuance," Cambridge Working Papers in Economics 1703, Faculty of Economics, University of Cambridge.
    2. Cortina, Juan J. & Ismail, Soha & Schmukler, Sergio L., 2018. "Firm financing and growth in the Arab region," Economic Systems, Elsevier, vol. 42(2), pages 361-383.
    3. Butt, Nick & Pugh, Alice, 2014. "Credit spreads: capturing credit conditions facing households and firms," Bank of England Quarterly Bulletin, Bank of England, vol. 54(2), pages 137-148.

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