Policies to stimulate investment in the age of financialization in Europe
Onaran, Özlem ORCID: 0000-0002-6345-9922 and Tori, Daniele (2017) Policies to stimulate investment in the age of financialization in Europe. [Working Paper]
|
PDF
GpercPolicyBrief onaran tori EU.pdf - Published Version Available under License Creative Commons Attribution Non-commercial No Derivatives. Download (737kB) | Preview |
Abstract
Despite increasing profits private investment remained weak in Europe as firms directed their profits to financial speculation (Tori and Onaran, 2017). Not only high dividend payments but also increasing financial revenues of firms due to their surging financial activities crowd out private investment in physical machinery and equipment. Perversely, financial activities do not automatically provide more funds for productive activity. According to econometric estimations by Tori and Onaran (2017) using firm balance sheet data in Europe the rate of investment by the NFCs would have been 27% higher without the rise in interest and dividend payments, and 10% higher without the crowding-out effect of increasing financial incomes. A properly designed public investment and industrial policy also needs to be complemented by a corporate governance reform to reinstate the missing link between private investments and profits. Under the guidance of a macroeconomic policy framework focused on full employment and equality, which helps to define and improve the vector of choices of firms, shareholders themselves could see the long-term stability of the corporation as their main goal once again.
Item Type: | Working Paper |
---|---|
Uncontrolled Keywords: | Financialization; Investment; Non-financial sector; Firm data; Europe; Financial development |
Subjects: | H Social Sciences > HG Finance |
Faculty / School / Research Centre / Research Group: | Faculty of Business Faculty of Business > Department of International Business & Economics Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Greenwich Political Economy Research Centre (GPERC) |
Last Modified: | 04 Aug 2021 16:33 |
URI: | http://gala.gre.ac.uk/id/eprint/16104 |
Actions (login required)
View Item |
Downloads
Downloads per month over past year