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The effects of financialization on investment: evidence from firm-level data for the UK

The effects of financialization on investment: evidence from firm-level data for the UK

Tori, Daniele and Onaran, Özlem ORCID: 0000-0002-6345-9922 (2018) The effects of financialization on investment: evidence from firm-level data for the UK. Cambridge Journal of Economics. ISSN 0309-166X (Print), 1464-3545 (Online)

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Abstract

This paper estimates the effects of financialization on physical investment in the UK using panel data based on balance-sheets of publicly listed non-financial companies supplied by Worldscope for the period 1985-2013. We find robust evidence of an adverse effect of not only financial payments (interests and dividends) but also financial incomes on the rate of accumulation. The negative impacts of financial incomes from interests and dividends are particularly strong for the pre-crisis period. Our findings support the ‘financialization thesis’ that the increasing orientation of the non-financial sector towards financial activities is ultimately leading to lower physical investment, hence to stagnant or fragile growth, as well as long term concerns for productivity.

Item Type: Article
Additional Information: An earlier version is in GALA as working paper (Tori, D., and Onaran, O. (2015), "The effects of financialization on investment: Evidence from firm-level data for the UK", Greenwich Papers in Political Economy, University of Greenwich, #GPERC17.); however this journal accepted version is the revised version after referee comments.
Uncontrolled Keywords: Financialization, Investment, Non-financial sector, Firm data, United Kingdom
Subjects: H Social Sciences > HG Finance
Faculty / Department / 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: 10 May 2019 11:00
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: GREAT a
Selected for GREAT 2019: GREAT 4
URI: http://gala.gre.ac.uk/id/eprint/18056

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