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Inventory investment, global engagement, and financial constraints in the UK: Evidence from micro data

  • Guariglia, Alessandra
  • Mateut, Simona

We use a panel of 9381 UK firms to study the links between firms' global engagement status and their financial health. We estimate inventory investment equations augmented with a financial composition variable, and interpret the sensitivity of inventory investment to the latter as a measure of the strength of the financial constraints faced by firms. We find that smaller, younger, and more risky firms; and firms that do not export and are not foreign owned exhibit higher sensitivities. Moreover, global engagement substantially reduces the sensitivities displayed by the former categories of firms: this suggests that it shields firms from financial constraints.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 1 (March)
Pages: 239-250

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:1:p:239-250
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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