Business fixed investment: evidence of a financial accelerator in Europe

Abstract

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Corporate debt and investment: A firm-level analysis for stressed euro area countries

“…Third, for micro and small firms, which account for 96 percent of all firms in our sample, we find evidence of a negative sensitivity of investment to debt service as measured in terms of the EBITDA-to-debt ratio. Overall, these results are in line with empirical findings by Vermeulen (2002) and the literature on the financial propagation mechanism, which states that large firms tend to be better diversified and are likely to face lower financial constraints (Gertler and Gilchrist, 1994). The results, therefore, provide some preliminary evidence for the importance of bank credit supply restrictions, thereby supporting earlier studies which find that investment by borrowers that are more dependent on banks drops significantly relative to that of borrowers less dependent on banks (Buca and Vermeulen, 2017).…”

“…A number of empirical studies find evidence that high corporate leverage can have negative effects on investment (Vermeulen, 2002;Benito and Hernando, 2007;Martinez-Carrascal and Ferrando, 2008;Pal and Ferrando, 2010;Kalemli-Özcan et al, 2015a;Barbiero et al, 2016).…”

“…Using industry level data, Vermeulen (2002) shows that leverage is more important in explaining investment during downturns and for small firms. Barbosa et al (2007) find for Portuguese firms that the impact of corporate indebtedness on investment depends on firm size, the number of bank lending relationships, and credit default history.…”

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

“…First, column 2 adds net indebtedness, (B m)=A 9 to the standard speci…cation. The expected negative coe¢ cient is obtained suggesting that a high level of debt can lead to balance sheet adjustment in the form of companies deferring or foregoing investment projects (see also Vermeulen, 2002 for an industry-level study). Second, in column 3 a signi…cantly negative and well-determined e¤ect is found for the total debt-burden, tdb.…”

Facility- and Service-Based Competition and Investment in Fixed Broadband Networks: Lessons from a Decade of Access Regulations in the European Union Member States

“…The authors conclude that firms that are financially constrained are more sensitive to the availability of internal funds, such as cash flow. There is a large literature that investigates the relationship between cash flow and investment, that takes into account different factors that might explain this relationship, including: creditworthiness, size and ownership structure (Bond et al, 2003;Gugler, 2003;Kaplan & Zingales, 1997;Vermeulen, 2002). So, different coefficient estimates for the variable cflow_as in the incumbents' and entrants' equations point to different levels of cash constraints due to creditworthiness, size and ownership structure.…”