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Financialisation, financial development, and investment: evidence from European non-financial corporations

Financialisation, financial development, and investment: evidence from European non-financial corporations

Tori, Daniele and Onaran, Özlem ORCID: 0000-0002-6345-9922 (2018) Financialisation, financial development, and investment: evidence from European non-financial corporations. Socio-Economic Review:mwy044. ISSN 1475-1461 (Print), 1475-147X (Online) (In Press) (doi:https://doi.org/10.1093/ser/mwy044)

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Abstract

This article provides estimations of the effects of different financial channels on physical investment in Europe using the balance sheets of publicly listed non-financial corporations (NFCs) for the period 1995–2015. The evidence suggests that both financial payments and financial income have an adverse effect on investment in fixed assets. The negative impacts of increasing financial income are non-linear with respect to company size: they crowd out investment in large companies, and have a positive effect on the investment of relatively smaller companies. Similar to the recent literature on finance-growth nexus, we find an inverted U-shaped relationship between financial development and companies’ investment. However, in contrast to the existing literature, we also find that a higher degree of financial development in the country is associated with a stronger negative effect of financial income on investment.

Item Type: Article
Uncontrolled Keywords: financialisation, financial development, non-financial corporations, fixed investment, Europe
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: 23 Oct 2019 11:20
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: GREAT 3
URI: http://gala.gre.ac.uk/id/eprint/22196

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