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Financial pressure and balance sheet adjustment by UK firms

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  • Andrew Benito
  • Garry Young

Abstract

In this paper the financial policies and balance sheet adjustment of companies are examined. Using a large panel of quoted UK firms, models for dividends, new equity issuance and investment are estimated, relating them to debt adjustment. The results suggest that while dividends are sticky in the short run, they are an important means of balance sheet adjustment in the long run. Other evidence supports the idea that companies actively target their balance sheet by variation in dividends, new equity issues and investment.

Suggested Citation

  • Andrew Benito & Garry Young, 2002. "Financial pressure and balance sheet adjustment by UK firms," Bank of England working papers 168, Bank of England.
  • Handle: RePEc:boe:boeewp:168
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hernando, Ignacio & Martínez-Carrascal, Carmen, 2008. "The impact of financial variables on firms' real decisions: Evidence from Spanish firm-level data," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 543-561, March.
    2. Andrew Benito, 2003. "The incidence and persistence of dividend omissions by Spanish firms," Working Papers 0303, Banco de España;Working Papers Homepage.
    3. Andrew Benito & John Whitley, 2003. "Implicit interest rates and corporate balance sheets: an analysis using aggregate and disaggregated UK data," Bank of England working papers 193, Bank of England.
    4. Andrew Benito, 2002. "Financial pressure, monetary policy effects and inventory adjustment by UK and Spanish firms," Working Papers 0226, Banco de España;Working Papers Homepage.
    5. Philip Bunn & Garry Young, 2004. "Corporate capital structure in the United Kingdom: determinants and adjustment," Bank of England working papers 226, Bank of England.
    6. Joerg Breitung & Robert Chirinko & Ulf von Kalckreuth, 2003. "A Vectorautoregressive Investment Model (VIM) and Monetary Policy Transmission: Panel Evidence from German Firms," Emory Economics 0307, Department of Economics, Emory University (Atlanta).
    7. Galindo, Arturo & Izquierdo, Alejandro & Montero, Jose Manuel, 2007. "Real exchange rates, dollarization and industrial employment in Latin America," Emerging Markets Review, Elsevier, vol. 8(4), pages 284-298, December.
    8. Philip Bunn & Kamakshya Trivedi, 2005. "Corporate expenditures and pension contributions: evidence from UK company accounts," Bank of England working papers 276, Bank of England.
    9. Peter Gibbard & Ibrahim Stevens, 2011. "Corporate debt and financial balance sheet adjustment: a comparison of the United States, the United Kingdom, France and Germany," Annals of Finance, Springer, vol. 7(1), pages 95-118, February.
    10. Albert Jaeger, 2003. "Corporate Balance Sheet Restructuring and Investment in the Euro Area," IMF Working Papers 03/117, International Monetary Fund.
    11. Marie Diron & Maria Cruz Manzano & Thomas Westermann, 2005. "Forecasting aggregate investment in the euro area: do indicators of financial conditions help?," BIS Papers chapters,in: Bank for International Settlements (ed.), Investigating the relationship between the financial and real economy, volume 22, pages 206-27 Bank for International Settlements.
    12. Ulf Von Kalckreuth, 2006. "Financial Constraints and Capacity Adjustment: Evidence from a Large Panel of Survey Data," Economica, London School of Economics and Political Science, vol. 73(292), pages 691-724, November.
    13. Andrew Benito & Garry Young, 2007. "Financial Pressure and Balance Sheet Adjustment by Firms," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(5), pages 581-602, October.
    14. Andrew Benito, 2003. "The capital structure decisions of firms: is there a pecking order?," Working Papers 0310, Banco de España;Working Papers Homepage.
    15. Alberto Jaramillo & Hermilson Velásquez & Javier Santiago Ortiz & Natalia Serna, 2003. "Aspectos teóricos y empíricos de la relación empresas bancos," DOCUMENTOS DE TRABAJO CIEF 003922, UNIVERSIDAD EAFIT.
    16. Andrew Benito & Ignacio Hernando, 2002. "Extricate: Financial Pressure and Firm Behaviour in Spain," Working Papers 0227, Banco de España;Working Papers Homepage.

    More about this item

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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