Investment, the cost of capital, and monetary policy in the nineties in France: a panel data investigation

Using a large panel of 6,946 French manufacturing firms, this paper investigates the effect of monetary policy on investment from 1990 to 1999 through the cost-of-capital and the cash-flow channels. We compare several specifications of neo-classical demand for capital, taking into account transitory dynamics. The user cost of capital has a significant negative elasticity with respect to capital using traditional Within estimates, or as long as cash-flow is not added to the regression when using Generalised Method of Moments estimates. Asymmetries of effect of monetary policy are evaluated for different groups of firms which differ in terms of informational asymmetries. When dummy variables related to firms which are more sensitive to cash-flow are added in the model, the user cost elasticity is significant again JEL Classification: C23, D21, D92cost of capital, generalised method of moments, Investment, monetary policy

Investment, the cost of capital, and monetary policy in the nineties in France: a panel data investigation

Using a large panel of 6,946 French manufacturing firms, this paper investigates the effect of monetary policy on investment from 1990 to 1999 through the cost-of-capital and the cash-flow channels. We compare several specifications of neo-classical demand for capital, taking into account transitory dynamics. The user cost of capital has a significant negative elasticity with respect to capital using traditional Within estimates, or as long as cash-flow is not added to the regression when using Generalised Method of Moments estimates. Asymmetries of effect of monetary policy are evaluated for different groups of firms which differ in terms of informational asymmetries. When dummy variables related to firms which are more sensitive to cash-flow are added in the model, the user cost elasticity is significant agai

Financial constraints and investment in France and Spain : a comparison using firm level data

This paper analyses corporate investment decisions in France and Spain, focusing on the role of financial constraints in explaining investment behaviour. For this purpose, we take advantage of very carefully harmonised data sets that allow for the use of variables homogeneously defined in both countries. The information used consists of two panel data sets of industry firms selected from those reporting information to the Central Balance Sheet Offices of the Banque de France and of the Banco de España over the period 1991-1999. So as to test for the existence of liquidity constraints, we conduct a test of excess sensitivity of investment to cash flow using a standard Euler equation model. More precisely, both the theoretical model and the testing strategy used in this paper closely follow Bond and Meghir (1994). These authors present an empirical model of investment based on the Euler equation of an extended version of the standard neoclassical model of investment. This model assumes that the firm faces a hierarchy of costs for the alternative sources of finance and leads to different characterisations of investment behaviour for firms pursuing different financial policies. Overall, our results suggest that there are significant differences in investment behaviour which are closely linked to the financial situation of firms. In particular, the evidence found is consistent with the investment expenditure of firms paying zero dividends being constrained by the availability of internally generated fund

Estudio comparado de las empresas industriales francesas y españolas (1991-1999)

Estudio conjunto Banco de España / Banco de Francia, coordinado por Annie Sauvé y Manuel Ortega.Con las contribuciones de Concepción Artola, Ana Esteban, Ignacio Hernando, Manuel Ortega, Annie Sauvé, Teresa Sastre, André Tiomo y Alain Tournier.Esta publicación recoge el trabajo de análisis llevado a cabo por las centrales de balances del Banco de Francia y del Banco de España de las empresas industriales de ambos países en el período de 1991 a 1999.El estudio recoge, entre otros, un análisis de la estructura financiera y del contenido de la cuenta de resultados y las ratios derivadas e información sobre el empleo, relacionándolo con las variables contables significativas

French and Spanish industrial corporations over the period 1991-1999

Common research Banco de España / Banque de France, co-ordinated by Annie Sauvé and Manuel OrtegaWith contributions by Concepción Artola, Ana Esteban, Ignacio Hernando, Manuel Ortega, Annie Sauvé, Teresa Sastre, André Tiomo and Alain Tournier.This publication covers the analysis conducted by the Central Balance Sheet Data Offices of the Bank of France and the Banco de España on the industrial companies of both countries from 1991 to 1999. The study includes an analysis of the financial structure and content of the income statement and derived ratios and information on employment, in terms of the main accounting variables

Financial constraints and investment in France and Spain: a comparison using firm level data

This paper analyses corporate investment decisions in France and Spain, focusing on the role of financial constraints in explaining investment behaviour. For this purpose, we take advantage of very carefully harmonised data sets that allow for the use of variables homogeneously defined in both countries. The information used consists of two panel data sets of industry firms selected from those reporting information to the Central Balance Sheet Offices of the Banque de France and of the Banco de España over the period 1991-1999. So as to test for the existence of liquidity constraints, we conduct a test of excess sensitivity of investment to cash flow using a standard Euler equation model. More precisely, both the theoretical model and the testing strategy used in this paper closely follow Bond and Meghir (1994). These authors present an empirical model of investment based on the Euler equation of an extended version of the standard neoclassical model of investment. This model assumes that the firm faces a hierarchy of costs for the alternative sources of finance and leads to different characterisations of investment behaviour for firms pursuing different financial policies. Overall, our results suggest that there are significant differences in investment behaviour which are closely linked to the financial situation of firms. In particular, the evidence found is consistent with the investment expenditure of firms paying zero dividends being constrained by the availability of internally generated funds.

Risques financiers : juniors vs seniors

Financial risks : juniors vs. seniors We consider the proportion of risky assets (stocks, bonds,...) among the household portfolios as a function of householder age, using two surveys conducted in 1995 on the holdings of financial assets. Unlike a common idea, older households hold more risky assets than their younger counterparts, both for homeowners and non homeowners and also among all wealth classes. We present the datasets used, the chosen classification of risky and riskless assets and we consider some explanations of the obtained results : learning effects, behaviour towards risk, background risk. We investigate the hypothesis that the volatility of young households earnings is high and thus that they minimize their risky financial investments.Nous étudions la part des actifs risqués (actions, obligations,...) dans le patrimoine financier des ménages en fonction de l’âge du chef de ménage, à partir de deux enquêtes réalisées en 1995 sur la détention d’actifs financiers. Contrairement à l’intuition courante, les seniors détiennent plus d’actifs risqués que les juniors, que l’on s’intéresse aux propriétaires ou aux non propriétaires et pour toutes les classes de richesse. Après avoir présenté nos données et une classification des actifs financiers, nous envisageons diverses explications à nos résultats : apprentissage, forme des préférences, dotations initiales. Nous considérons en particulier l’idée selon laquelle les jeunes ménages aisés ayant un risque de fluctuation de leurs revenus plus important que leurs aînés vont, dans une logique de diversification du risque, minorer leurs placements financiers risqués.Laurent Jean-Paul, Tiomo André. Risques financiers : juniors vs seniors. In: Revue d'économie financière, n°49, 1998. Amartya Sen : La jeune recherche en économie financière . pp. 189-211

LA STRUCTURE PAR TERME DES TAUX DE DÉFAUT ET RATINGS

Le but de cet article est de décrire et comparer les systèmes de notations utilisées par les principales agences spécialisées (Standard & Poor’s, Moody’s et Fitch) avec le score de référence mis en place par la Banque de France. En particulier, nous analysons les structures par terme de défaut et de notation et la dynamique des transitions entre notes.The aim of this paper is to describe and compare the rating principles used by the main rating agencies (Standard & Poor’s, Moody’s and Fitch) with the benchmark scoring developed by the Banque de France. In panicular, we analyse the term structures of default and rating and the dynamic of transition matrices