Excess Leverage and Productivity Growth in Emerging Economies: Is There a Threshold Effect?

55 Pages Posted: 11 Jan 2010

See all articles by Fabrizio Coricelli

Fabrizio Coricelli

University of Siena - Department of Political and International Sciences ; Paris School of Economics (PSE); Centre for Economic Policy Research (CEPR)

Nigel L. Driffield

Aston University - Aston Business School

Sarmistha Pal

University of Surrey; IZA Institute of Labor Economics

Isabelle Roland

London School of Economics & Political Science (LSE)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2009

Abstract

This paper studies the relationship between leverage and growth, focusing on a large sample of firms in emerging economies of central and eastern Europe (CEE). Contrary to the general wisdom, we find that deviation from optimal leverage, especially excess leverage, is common among firms in many CEE countries. Using firm-level panel data, the paper provides support to the hypothesis that leverage positively affects productivity growth but only below an endogenously determined threshold level.

Keywords: Excess Leverage, TFP growth, Threshold model

JEL Classification: G32, O16

Suggested Citation

Coricelli, Fabrizio and Driffield, Nigel L. and Pal, Sarmistha and Roland, Isabelle, Excess Leverage and Productivity Growth in Emerging Economies: Is There a Threshold Effect? (December 2009). CEPR Discussion Paper No. DP7617, Available at SSRN: https://ssrn.com/abstract=1533221

Fabrizio Coricelli (Contact Author)

University of Siena - Department of Political and International Sciences ( email )

Via Mattioli, 10
Siena, 53100
Italy

Paris School of Economics (PSE)

48 Boulevard Jourdan
Paris, 75014 75014
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Nigel L. Driffield

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, B47ET
United Kingdom

HOME PAGE: http://www.abs.aston.ac.uk/newweb/staff/Default.asp#E&S

Sarmistha Pal

University of Surrey ( email )

Stag Hill
Guildford, England GU2 7XH
United Kingdom
01483 683995 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Isabelle Roland

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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