Excess Leverage and Productivity Growth in Emerging Economies: Is There A Threshold Effect?

Fabrizio Coricelli, Nigel Driffield, Sarmistha Pal and Isabelle Roland ()
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Isabelle Roland: London School of Economics

No 4834, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: bank efficiency; market capitalization; TFP growth; Threshold model; non-linear relationship; excess leverage; transition experience (search for similar items in EconPapers)
JEL-codes: G32 O16 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2010-03
New Economics Papers: this item is included in nep-eec, nep-eff, nep-fdg and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published - revised version published as 'When does leverage hurt productivity growth? A firm-level analysis' in: Journal of International Money and Finance, 2012, 31 (6), 1674-1694

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Related works:
Working Paper: Excess Leverage and Productivity Growth in Emerging Economies: Is There A Threshold Effect? (2009)
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