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The impact of firms’ financial position on fixed investment and employment. An analysis for Spain

Fátima Herranz González and Carmen Martínez-Carrascal ()
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Fátima Herranz González: Banco de España
Carmen Martínez-Carrascal: Banco de España

Authors registered in the RePEc Author Service: Carmen Martinez Carrascal

No 1714, Working Papers from Banco de España, Working Papers Homepage

Abstract: Using a large sample of Spanish companies, this paper investigates the impact that firms’ financial health has on their investment and employment decisions. The results indicate that firms’ financial position is important for explaining firms’ capital expenditures and their employment levels, since cash flow, indebtedness and the debt burden appear to be relevant for explaining investment and employment dynamics. Likewise, the results obtained point to a non-linear impact of financial position on these decisions, this being larger for companies in a less sound financial situation, and suggest that the role of financial factors in explaining investment and employment dynamics is likely to be greater in recessionary periods.

Keywords: financial position; investment; employment; panel data (search for similar items in EconPapers)
JEL-codes: C33 E22 E24 E44 G32 J23 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2017-04
New Economics Papers: this item is included in nep-cfn, nep-eur and nep-mac
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