Financial flexibility across the euro area and the UK

Annalisa Ferrando, Maria-Teresa Marchica and Roberto Mura

No 1630, Working Paper Series from European Central Bank

Abstract: We use a large database of more than 685,000 European firms to show that financial flexibility attained through conservative leverage policies is more important for private, small, medium-sized and young firms and for firms in countries with lower access to credit and weaker investor protection. Further, using the recent financial crisis as a natural experiment, we show that financial flexibility status allows companies to reduce the negative impact of liquidity shocks on their investment decisions. Our findings support the hypothesis that financial flexibility relates to companies JEL Classification: G31, G32, D92

Keywords: cross-country analysis; financial flexibility; investment; low leverage (search for similar items in EconPapers)
Date: 2014-01
New Economics Papers: this item is included in nep-cfn and nep-eec
Note: 235236
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20141630

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