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Title: Leverage and productivity growth in emerging economies: Is there a threshold effect?
Authors: Coricelli, F
Driffield, N
Pal, S
Roland, I
Keywords: Excess leverage
Bank efficiency
Market capitalisation
TFP growth
Threshold model
Non-linear relationship
Transition experience
Publication Date: 2010
Publisher: Brunel University
Citation: Economics and Finance Working Paper, Brunel University, 10-21
Abstract: While credit is essential for investment, innovation and economic growth, there are risks to unfettered credit booms. The present paper provides an innovative micro-economic approach to identify the threshold leverage beyond which corporate indebtedness becomes “excessive”. In particular, the paper hypothesizes a non-linear relationship in that moderate leverage could boost growth while very high leverage could restrict total factor productivity growth, through increased likelihood of financial distress and bankruptcy. Estimates of a threshold model for a group of emerging CEE countries confirm the non-linear relationship, after controlling for various firm, industry and financial market characteristics.
Sponsorship: Financial support from ESRC grant RES-062-23-0986 is gratefully acknowledged
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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