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How does financial pressure affect firms?

  • Nickell, Stephen
  • Nicolitsas, Daphne

How does monetary policy work? While one aspect of the investigation has focused on the behaviour of consumers, another has concentrated on the behaviour of companies faced with the kind of financial pressures associated with tight monetary policy. The general focus in this area is on the impact of financial constraints on investment expenditures including fixed capital and inventories. Our purpose is to shift this focus somewhat and to concentrate on the impact of financial pressure on other aspects of company behaviour. We first discuss briefly the theoretical background and the empirical formulation. Then, using panel data on a large number of UK companies, we derive a number of results.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 43 (1999)
Issue (Month): 8 (August)
Pages: 1435-1456

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Handle: RePEc:eee:eecrev:v:43:y:1999:i:8:p:1435-1456
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  3. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-46, August.
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  13. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 33-60.
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  16. Stephen Nickell & D. Nicolitsas, 1994. "Wages," LSE Research Online Documents on Economics 51644, London School of Economics and Political Science, LSE Library.
  17. Anonymous, 1994. "Monetary Policy Statement, December 1994," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 57, December.
  18. Stephen Bond & Costas Meghir, 1994. "Dynamic Investment Models and the Firm's Financial Policy," Review of Economic Studies, Oxford University Press, vol. 61(2), pages 197-222.
  19. Michael Devereux & Fabio Schiantarelli, 1990. "Investment, Financial Factors, and Cash Flow: Evidence from U.K. Panel Data," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 279-306 National Bureau of Economic Research, Inc.
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