Chapter 7: Financialization and Investment: Firm-level Analysis
7. Financialization and investment: ﬁrm-level analysis Analysis of aggregate time-series data provides initial support for the view that ﬁnancialization has negative eﬀects on NFC investment in real capital. In this chapter, I carry on the analysis to ﬁrm level and empirically test the impact of ﬁnancialization on a large sample of nonﬁnancial ﬁrms for the period 1973–2003. I use diﬀerent sector, industry and size speciﬁcations to examine the robustness of the ﬁndings. While most results are robust across these diﬀerent speciﬁcations, I identify diﬀerent eﬀects of ﬁnancialization on ﬁrms from diﬀerent sectors and sizes. For example, while the negative eﬀect of ﬁnancialization through increased ﬁnancial payout ratios is unambiguous across industries, and in small and large ﬁrms, the negative eﬀect of increased ﬁnancial proﬁts is most obvious in large corporations which were arguably more involved in ﬁnancial investments than small corporations. The contribution of this chapter is unique in that it makes use of a ﬁrm-level database to test these hypotheses for the ﬁrst time. Earlier analyses, both Stockhammer (2004) and the previous chapter are limited to aggregate data analyses, which may have prevented the identiﬁcation of cross-ﬁrm diﬀerences. Firm-level data permit the analysis of the eﬀects and extent of ﬁnancialization on ﬁrms of diﬀerent sizes and in diﬀerent sectors and/or industries. Just as important, ﬁrm-level data make it possible to analyse the characteristics of large ﬁrms, which are most likely...
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