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Corporate Indebtedness and Low Productivity Growth of Italian Firms, Gareth Anderson, Mehdi Raissi

Label
Corporate Indebtedness and Low Productivity Growth of Italian Firms, Gareth Anderson, Mehdi Raissi
Language
eng
Abstract
Productivity growth in Italy has been persistently anemic and has lagged that of the euro area over the period 1999-2015, while the indebtedness of its corporate sector has increased. Using the ORBIS firm-level database, this paper studies the long-term impact of persistent corporate-debt accumulation on the productivity growth of Italian firms and investigates whether total factor productivity growth varies with the level of corporate indebtedness. We employ a novel estimation technique proposed by Chudik, Mohaddes, Pesaran, and Raissi (2017) to account for dynamics, bi-directional feedback effects, cross-firm heterogeneity, and cross-sectional dependence arising from unobserved common factors (for example, oil price shocks, labor and product market frictions, and stance of global financial cycle). Filtering out the effects of unobserved common factors and controlling for firmspecific characteristics, we find significant negative effects of persistent corporate debt build-up on total factor productivity growth, and weak evidence of a threshold level of corporate debt, beyond which productivity growth drops off significantly. Our results have strong policy implications, for example the design of the tax system should discourage persistent corporate debt accumulation, and effective and timely frameworks to reduce corporate debt overhangs are essential
resource.governmentPublication
international or intergovernmental publication
Literary Form
non fiction
Main title
Corporate Indebtedness and Low Productivity Growth of Italian Firms
Nature of contents
dictionaries
Oclc number
1029497344
Responsibility statement
Gareth Anderson, Mehdi Raissi
Series statement
IMF Working Papers
Table Of Contents
Cover -- Contents -- 1 Introduction -- 2 Data -- 3 Descriptive Statistics -- 3.1 Coverage -- 3.2 Evolution of Firm Indebtedness -- 3.3 Firm Productivity -- 4 Empirical Framework -- 4.1 Auto-Regressive Distributed Lag (ARDL) Approach -- 4.1.1 Estimation and Panel Tests of Threshold Effects -- 4.2 Distributed Lag (DL) Approach -- 4.3 Cross-Sectionally augmented ARDL and DL Approaches -- 5 Results -- 5.1 Estimates of Long-Run Effects -- 5.2 Tests of Corporate Debt-Threshold Effects -- 5.3 Estimates of Short-Run Effects -- 5.4 Economic Significance -- 6 Extensions and Robustness -- 6.1 Long-Run Effects by Firm Size and Sector -- 6.2 Alternative Measures of Corporate Indebtedness -- 6.2.1 Debt to EBITDA -- 6.2.2 Debt to Assets -- 6.2.3 Long-Term Debt to Value Added -- 6.2.4 Economic Significance of Alternative Measures of Corporate Indebtedness -- 6.3 Alternative Measures of Productivity -- 6.4 Jackknife Fixed Effects Estimator -- 7 Conclusion -- List of Figures -- 1 Total Factor Productivity and Corporate Indebtedness, Cross-Country Comparison -- 2 Coverage of Manufacturing and Non-Manufacturing Employment, Unbalanced Panel -- 3 Different Measures of Firm Indebtedness -- 4 Total Asset Growth, Balanced Panel -- 5 Total Factor Productivity Growth -- 6 Dynamic Response of TFP to a Change in Debt -- 7 Percentage of Firms Exceeding the Threshold Level of Indebtedness -- 8 Percentage of Firms Exceeding the Threshold Level of Indebtedness, by Size and Sector -- 9 Distribution of Long Run Coefficient Estimates -- 10 Percentage of Firms Exceeding the Threshold Level of Indebtedness, by Industry -- List of Tables -- 1 Employment and TFP Growth, Balanced and Unbalanced Panels -- 2 Debt to Value Added, by Firm Size and Sector, Balanced Panel -- 3 Debt to Value Added, by Industry, Balanced Panel4 Mean Group Estimates of Long-Run Effects of Corporate Indebtedness on TFP Growth -- 5 Mean Group Estimates of Short-Run Effects of Corporate Indebtedness on TFP Growth -- 6 Mean Group Estimates of Long-Run Effects of Corporate Indebtedness on TFP Growth, by Firm Size and Sector -- 7 Mean Group Estimates of Long-Run Effects Using Debt to EBITDA -- 8 Mean Group Estimates of Long-Run Effects Using Debt to Assets -- 9 Mean Group Estimates of Long-Run Effects Using Long-Term Debt to Value Added -- 10 Long-Run E?ects of Alternative Measures of Corporate Indebtedness on TFP Growth -- 11 Mean Group Estimates of Long-Run Effects Using Alternative TFP Measures -- 12 Mean Group Estimates of Long-Run Effects of Corporate Indebtedness on Labor Productivity Growth -- 13 Jackknife FE Estimates of Long-Run Effects of Corporate Indebtedness on TFP Growth
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