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How does financial pressure affect firms?

  • Stephen Nickell
  • Daphne Nicolitsas

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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File URL: http://eprints.lse.ac.uk/20698/
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 20698.

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Length: 41 pages
Date of creation: Oct 1995
Date of revision:
Handle: RePEc:ehl:lserod:20698
Contact details of provider: Postal: LSE Library Portugal Street London, WC2A 2HD, U.K.
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/

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  1. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
  2. Wadhwani, Sushil B, 1987. "The Effects of Inflation and Real Wages on Employment," Economica, London School of Economics and Political Science, vol. 54(213), pages 21-40, February.
  3. Nickell, Stephen, 1984. "An Investigation of the Determinants of Manufacturing Employment in the United Kingdom," Review of Economic Studies, Wiley Blackwell, vol. 51(4), pages 529-57, October.
  4. Nickell, S & Vainiomaki, J & Wadhwani, S, 1994. "Wages and Product Market Power," Economica, London School of Economics and Political Science, vol. 61(244), pages 457-73, November.
  5. Mark Gertler & Simon Gilchrist, 1993. "The role of credit market imperfections in the monetary transmission mechanism: arguments and evidence," Finance and Economics Discussion Series 93-5, Board of Governors of the Federal Reserve System (U.S.).
  6. Gertler, M. & Gilchrist, S., 1992. "Monetary Policy, Business Cycles and the Behavior of Small Manufacturing Firms," Working Papers 92-08, C.V. Starr Center for Applied Economics, New York University.
  7. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
  8. King, Mervyn, 1994. "Debt deflation: Theory and evidence," European Economic Review, Elsevier, vol. 38(3-4), pages 419-445, April.
  9. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345.
  10. Steven A. Sharpe, 1993. "Financial market imperfections, firm leverage and the cyclicality of employment," Finance and Economics Discussion Series 93-10, Board of Governors of the Federal Reserve System (U.S.).
  11. Stephen Bond & Costas Meghir, 1990. "Dynamic Investment Models and the Firm's Financial Policy," CEPR Financial Markets Paper 0013, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
  12. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-46, August.
  13. Wadhwani, Sushil & Wall, Martin, 1986. "The UK Capital Stock--New Estimates of Premature Scrapping," Oxford Review of Economic Policy, Oxford University Press, vol. 2(3), pages 44-55, Autumn.
  14. Stephen Nickell & D. Nicolitsas, 1994. "Wages," LSE Research Online Documents on Economics 51644, London School of Economics and Political Science, LSE Library.
  15. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  16. Nickell, Stephen & Wadhwani, Sushil B, 1989. "Employment Determination in British Industry: Investigations Using Micro-Data," CEPR Discussion Papers 320, C.E.P.R. Discussion Papers.
  17. Michael Devereux & Fabio Schiantarelli, 1989. "Investment, Finacial Factors and Cash Flow: Evidence From UK Panel Data," NBER Working Papers 3116, National Bureau of Economic Research, Inc.
  18. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989. "Corporate structure, liquidity, and investment: evidence from Japanese industrial groups," Finance and Economics Discussion Series 82, Board of Governors of the Federal Reserve System (U.S.).
  19. Anonymous, 1994. "Monetary Policy Statement, December 1994," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 57, December.
  20. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
  21. Stephen Nickell & D. Nicolitsas, 1994. "Wages, effort and productivity," LSE Research Online Documents on Economics 20794, London School of Economics and Political Science, LSE Library.
  22. Bils, Mark, 1987. "The Cyclical Behavior of Marginal Cost and Price," American Economic Review, American Economic Association, vol. 77(5), pages 838-55, December.
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