Monetary Policy, Corporate Finance and Investment

By J. Cloyne, Clodomiro Ferreira, M. Froemel, P. Surico. Social Science Research Network, 2018

236 citations recorded by the source corpus.

In response to a change in interest rates, younger firms not paying dividends adjust both their capital expenditure and borrowing significantly more than older firms paying dividends. The reason is that the debt of younger non-dividend payers is far more sensitive to fluctuations in collateral values, which are significantly affected by monetary policy. The results are robust to a wide range of possible confounding factors. Other channels, including movements in interest payments, product demand, profitability and mark-ups, are also significant but seem unlikely to explain the heterogeneity in the response of capital expenditure. Our findings suggest that these types of financial frictions play an important role in the transmission of monetary policy.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/5753690b1288d3457aa4816fc4283a1c9b842f94

Citations in the corpus

• Financial Heterogeneity and the Investment Channel of Monetary Policy (2018, unknown): “Other studies argue that the firm-level response also depends on size (Gertler and Gilchrist (1994)), liquidity (Jeenas (2019)), or age (Cloyne et al. (2018)).”