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Multiple Market Imperfections, Firm Profitability and Investment

Author

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  • Giorgio Calcagnini

    (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")

  • Annalisa Ferrando

    (European Central Bank Frankfurt)

  • Germana Giombini

    (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")

Abstract

This paper investigates the impact of the interaction between product, labor and financial market imperfections on firms? investment by using a panel data of European firms over the period 1994-2008. It studies the impact of product and labor market regulations on firm investment and how it changes with the degree of financial market imperfections. Findings show that product and labor market regulations negatively affect firm investment by lowering firm profitability. The presence of more efficient financial markets increases firm investment and lowers the negative effects of market regulations.

Suggested Citation

  • Giorgio Calcagnini & Annalisa Ferrando & Germana Giombini, 2013. "Multiple Market Imperfections, Firm Profitability and Investment," Working Papers 1305, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2013.
    • Handle: RePEc:urb:wpaper:13_05
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    Cited by:

    1. Stieglitz, Moritz & Setzer, Ralph, 2022. "Firm-level employment, labour market reforms, and bank distress," Journal of International Money and Finance, Elsevier, vol. 120(C).
    2. Giorgio Calcagnini & Germana Giombini & Giuseppe Travaglini, 2021. "The Productivity Gap Among Major European Countries, USA and Japan," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(1), pages 59-78, March.
    3. Kose,Ayhan & Ohnsorge,Franziska Lieselotte & Ye,Lei Sandy & Islamaj,Ergys, 2017. "Weakness in investment growth : causes, implications and policy responses," Policy Research Working Paper Series 7990, The World Bank.
    4. Giorgio Calcagnini & Germana Giombini & Giuseppe Travaglini, 2015. "The productivity gap among European countries," Working Papers 1510, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2015.
    5. Nicholas Apergis, 2020. "Financial market imperfections and profitability: New evidence from a large panel of US SME firms," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(2), pages 220-241, March.
    6. Jože Damijan & Jozef Konings & Črt Kostevc & Katja Zajc Kejžar, 2022. "Explaining the Low Level of Investment in Slovenia," European Economy - Discussion Papers 169, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    7. Germana Giombini & Francesco Perugini & Giuseppe Travaglini, 2017. "The productivity slowdown puzzle of European countries: a focus on Italy," Argomenti, University of Urbino Carlo Bo, Department of Economics, Society & Politics, vol. 6(6), pages 1-20, January-A.
    8. Annalisa Ferrando & Carsten Preuss, 2018. "What finance for what investment? Survey-based evidence for European companies," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(3), pages 1015-1053, December.
    9. Stamm,Kersten Kevin & Vorisek,Dana Lauren, 2023. "The Global Investment Slowdown : Challenges and Policies," Policy Research Working Paper Series 10364, The World Bank.
    10. Calcagnini, Giorgio & Giombini, Germana & Travaglini, Giuseppe, 2019. "A theoretical model of imperfect markets and investment," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 237-244.
    11. Man Chen & Si Liu & Feng Wang & Rui Guo, 2024. "The dark side effects of CEO general managerial skills on corporate overinvestment," Asia Pacific Journal of Management, Springer, vol. 41(4), pages 2277-2300, December.
    12. Javier Escribá-Pérez & María José Murgui-García, 2017. "Do market regulations reduce investment? Evidence from European regions," Regional Studies, Taylor & Francis Journals, vol. 51(9), pages 1336-1347, September.
    13. Mihaela Brîndușa Tudose & Savin Dorin Ionesi & Ionuț Dulgheriu & Liliana Buhu & Valentina Diana Rusu, 2024. "Micro, Small or Medium, New or Old—Are There Differences? Testing Business-Specific Difficulties," Mathematics, MDPI, vol. 12(24), pages 1-29, December.
    14. Giombini, Germana & Teobaldelli, Désirée & Schneider, Friedrich, 2018. "Interaction effect of tax evasion and legal system inefficiency on firms' financial constraints," International Review of Economics & Finance, Elsevier, vol. 55(C), pages 1-20.

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    More about this item

    Keywords

    Investment; Regulation Impact; EPL; Financial Market Development.;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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