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Hiring, investments, and financial distress: evidence from a Panel VAR analysis of Japanese firms

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  • Hirokazu Mizobata

    (Tezukayama University)

Abstract

We analyse the dynamic interactions among investment, hiring, and financial distress using a panel vector auto-regression approach to identify the effect of one shock while other shocks remain constant. The results indicate that adjustments in capital and labour significantly interact with each other and that financial distress critically influences these two components. We conclude that firm's dynamic optimization problem should be understood by accounting for these three factors simultaneously.

Suggested Citation

  • Hirokazu Mizobata, 2015. "Hiring, investments, and financial distress: evidence from a Panel VAR analysis of Japanese firms," Economics Bulletin, AccessEcon, vol. 35(4), pages 2558-2566.
    • Handle: RePEc:ebl:ecbull:eb-15-00532
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    References listed on IDEAS

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    5. Love, Inessa & Zicchino, Lea, 2006. "Financial development and dynamic investment behavior: Evidence from panel VAR," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 190-210, May.
    6. Frederico Belo & Xiaoji Lin & Santiago Bazdresch, 2014. "Labor Hiring, Investment, and Stock Return Predictability in the Cross Section," Journal of Political Economy, University of Chicago Press, vol. 122(1), pages 129-177.
    7. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    8. Andrews, Donald W. K. & Lu, Biao, 2001. "Consistent model and moment selection procedures for GMM estimation with application to dynamic panel data models," Journal of Econometrics, Elsevier, vol. 101(1), pages 123-164, March.
    9. Eberly, Janice & Rebelo, Sergio & Vincent, Nicolas, 2012. "What explains the lagged-investment effect?," Journal of Monetary Economics, Elsevier, vol. 59(4), pages 370-380.
    10. Yashiv, Eran, 2011. "The Joint Behavior of Hiring and Investment," CEPR Discussion Papers 8237, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Motegi, Kaiji & Sadahiro, Akira, 2018. "Sluggish private investment in Japan’s Lost Decade: Mixed frequency vector autoregression approach," The North American Journal of Economics and Finance, Elsevier, vol. 43(C), pages 118-128.
    2. Amundsen, Alexander, 2023. "Interaction effects in the adjustment cost function of firms," Journal of Economic Dynamics and Control, Elsevier, vol. 146(C).
    3. Tang, Le, 2022. "The dynamic demand for capital and labor: Evidence from Chinese industrial firms," Economic Modelling, Elsevier, vol. 107(C).

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    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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