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Title:Excess leverage and productivity growth in emerging economies: Is there a threshold effect? PDF Logo
Authors:Coricelli, Fabrizio
Driffield, Nigel
Pal, Sarmistha
Roland, Isabelle
Issue Date:2010
Series/Report no.:Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 4834
Abstract:The paper examines the relationship between leverage and growth in a group of emerging central and eastern European countries, who are at different levels of financial market development. We hypothesize a non-linear relationship in that moderate leverage could boost growth while very high leverage could lower it by increasing the likelihood of financial distress and bankruptcy. Estimates of a Threshold model confirm the non-linear relationship in our sample, after controlling for various firm, industry and financial market characteristics. We also endogenously determine a threshold level of leverage beyond which further increases in leverage could lower TFP growth.
Subjects:Excess leverage
bank efficiency
market capitalization
TFP growth
Threshold model
non-linear relationship
transition experience
JEL:G32
O16
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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