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The effects of financialization on investment: evidence from firm-level data for the UK

Tori, Daniele and Onaran, Ozlem (2018). The effects of financialization on investment: evidence from firm-level data for the UK. Cambridge Journal of Economics, 42(5) pp. 1393–1416.

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DOI (Digital Object Identifier) Link: https://doi.org/10.1093/cje/bex085
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Abstract

This paper estimates the effects of financialization on physical investment in the UK using panel data based on balance-sheets of publicly listed non-financial companies supplied by Worldscope for the period 1985-2013. We find robust evidence of an adverse effect of not only financial payments (interests and dividends) but also financial incomes on the rate of accumulation. The negative impacts of financial incomes from interests and dividends are particularly strong for the pre-crisis period. Our findings support the ‘financialization thesis’ that the increasing orientation of the non-financial sector towards financial activities is ultimately leading to lower physical investment, hence to stagnant or fragile growth, as well as long term concerns for productivity.

Item Type: Journal Item
Copyright Holders: 2018 The Authors
ISSN: 1464-3545
Keywords: Financialization; Investment; Non-financial sector; Firm data; United Kingdom
Academic Unit/School: Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL)
Item ID: 52367
Depositing User: Daniele Tori
Date Deposited: 17 Nov 2017 15:42
Last Modified: 04 Jun 2019 15:13
URI: http://oro.open.ac.uk/id/eprint/52367
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