Do Financial Factors Affect The Capital-Labour Ratio: Evidence From UK Firm-Level Data

Marina-Eliza Spaliara

Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: This paper analyses how firms’ capital-labour ratio is affected by cash flow, leverage, and collateral, and how this effect differs at firms more and less likely to face financing constraints using a rich UK firm-level data set. It is common in the literature to examine the impact of financial constraints on hiring and firing decisions separately from their impact on decisions related to investment in physical capital. We argue that as long as firms use both inputs in production and there is some substitutability between them, the two decisions need to be jointly analysed. When we differentiate across firms that are more or less financially constrained, we find that the former group exhibits higher sensitivities of the capital-labour ratio to firm-specific characteristics compared to the latter.

Keywords: Firm-specific characteristics; Capital-labour ratio; Financial constraints. (search for similar items in EconPapers)
Date: 2009-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
https://www.nottingham.ac.uk/cfcm/documents/papers/09-04.pdf (application/pdf)

Related works:
Journal Article: Do financial factors affect the capital-labour ratio? Evidence from UK firm-level data (2009)
Working Paper: Do Financial Factors Affect the Capital-Labour Ratio? Evidence form UK FIrm-Level Data (2008)
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: https://EconPapers.repec.org/RePEc:not:notcfc:09/04

Access Statistics for this paper

More papers in Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM) School of Economics University of Nottingham University Park Nottingham NG7 2RD. Contact information at EDIRC.
Bibliographic data for series maintained by Hilary Hughes (hilary.hughes@nottingham.ac.uk).