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The impact of financial variables on firms’ real decisions: evidence from Spanish firm-level data

In: Investigating the relationship between the financial and real economy

Author

Listed:
  • Ignacio Hernando

    (Bank of Spain)

  • Carmen Martínez-Carrascal

    (Bank of Spain)

Abstract

This paper analyses the impact of alternative measures of firms' financial health on their investment and employment decisions, using a large-scale panel dataset of Spanish firms over the period 1985-2001. The paper pays particular attention to the non-linear nature of the relationship between firms' financial position and their demand of productive factors. Our results show that corporate financial position affects business activity and that this impact is more intense when financial pressure exceeds a certain threshold. Alternative functional forms to capture the non-linearity of this relationship have also been analyzed and cannot be discarded.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Ignacio Hernando & Carmen Martínez-Carrascal, 2005. "The impact of financial variables on firms’ real decisions: evidence from Spanish firm-level data," BIS Papers chapters, in: Bank for International Settlements (ed.), Investigating the relationship between the financial and real economy, volume 22, pages 40-63, Bank for International Settlements.
    • Handle: RePEc:bis:bisbpc:22-04
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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