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Does Firms' Financial Status Affect Plant-Level Investment and Exit Decisions?

  • Joachim K Winter

This paper investigates the influence of a firm's financial status on the within-firm allocation of funds, reflected in its plant-level investment and exit decisions. In the empirical analysis, financial status is measured by both standard measures and an indicator variable recently suggested by Kaplan and Zingales. Based on these firm-level financial variables and on planet-level investment and production data from the U.S. Census Bureau's Longitudinal Research Database(LRD), econometric models of plant operating regimes are estimated which summarize investment and exit decisions. The empirical evidence supports the view that firm-level financial status affects investments and market exit decisions observed at the plant level.

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File URL: ftp://ftp2.census.gov/ces/wp/1999/CES-WP-99-03.pdf
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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 99-3.

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Date of creation: Jan 1999
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Handle: RePEc:cen:wpaper:99-3
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  1. John M. Abowd & Bruno Crepon & Francis Kramarz & Alain Trognon, 1995. "A La Recherche des Moments Perdus: Covariance Models for Unbalanced Panels with Endogenous Death," NBER Technical Working Papers 0180, National Bureau of Economic Research, Inc.
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  9. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 2000. "Investment-Cash Flow Sensitivities Are Useful: A Comment On Kaplan And Zingales," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 695-705, May.
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  14. Dan Kovenock & Gordon M Phillips, 1995. "Capital Structure and Product Market Behavior: An Examination of Plant Exit and Investment Decisions," Working Papers 95-4, Center for Economic Studies, U.S. Census Bureau.
  15. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
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  18. Ariel Pakes, 1991. "Dynamic Structural Models: Problems and Prospects. Mixed Continuous Discrete Controls and Market Interactions," Cowles Foundation Discussion Papers 984, Cowles Foundation for Research in Economics, Yale University.
  19. Winter, Joachim, . "Investment and Exit Decisions at the Plant Level: A Dynamic Programming Approach," Monographs in Economics, University of Munich, Department of Economics, number 19732.
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