Economics at your fingertips  

Growth effects of corporate balance sheet adjustments in the EU

Romanos Priftis () and Anastasia Theofilakou ()
Additional contact information
Anastasia Theofilakou: University of Athens

Empirical Economics, 2021, vol. 60, issue 2, No 9, 773-801

Abstract: Abstract This paper investigates the impact of active balance sheet adjustments in the non-financial corporate sector on economic growth in the EU. We jointly model firms’ ability to reduce their balance sheet imbalances and a growth equation in an instrumental variables (IV) panel context. This enables us to explicitly consider the contemporaneous interaction between corporate balance sheet adjustment and growth, which can otherwise bias inference. Our main findings inter alia suggest that periods of active corporate deleveraging are associated on average with lower output growth compared to periods when no adjustment takes place. Moreover, a decline in corporate debt overhang supports output growth. Model-based simulations are in line with these findings.

Keywords: Corporate deleveraging; Growth effects; IV estimation; European union (search for similar items in EconPapers)
JEL-codes: C3 E21 G2 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-019-01769-3

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2021-06-13
Handle: RePEc:spr:empeco:v:60:y:2021:i:2:d:10.1007_s00181-019-01769-3