Impact of Liquidity constraint on Firms’ Investment Decisions

Saibal Ghosh and Saurabh Ghosh

MPRA Paper from University Library of Munich, Germany

Abstract: The paper investigates whether the effects of monetary policy on firm investment can be transmitted through leverage. The findings indicate that monetary contractions reduce investment for highly leveraged firms. The estimates imply that a 1percentage point increase in leverage reduces investment by 0.109 percent through leverage. Robustness tests broadly validate these findings.

Keywords: investment; leverage; India (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2006
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Published in Economia Internazionale 1.54(2006): pp. 17-32

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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:17181

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