In this paper we estimate the effects of financialisation on physical investment in selected western European countries using panel data based on the balance-sheets of publicly listed non-financial companies (NFCs) supplied by Worldscope for the period 1995-2015. We find robust evidence of an adverse effect of both financial payments (interests and dividends) and financial incomes on investment in fixed assets by the NFCs. This finding is robust for both the pool of all Western European firms and single country estimations. The negative impacts of financial incomes are non-linear with respect to the companies’ size: financial incomes crowd-out investment in large companies, and have a positive effect on the investment of only small, relatively more credit-constrained companies. Moreover, we find that a higher degree of financial development is associated with a stronger negative effect of financial incomes on companies’ investment. This finding challenges the common wisdom on ‘finance-growth nexus’. Our findings support the ‘financialisation 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 stagnation in productivity.
FEPS President at Euronews talk-show ‘Brussels, my love?’
by Euronews 15/01/2024
Panellists discussed topics including EU fiscal rules reform, German farmer's protests, and the decision of Charles Michel to quit his job early to run for MEP.
“Trade doesn’t work in isolation from good domestic policies” Interview to Arancha González
by Borderlex 19/09/2023
Interview to Arancha González, former Spanish foreign minister, who released together with FEPS the new book entitled 'The Trade Handbook: Making Trade Work for Prosperity, People and Planet'
A szociális unió imperatívusza
by Új Egyenlőség 09/09/2023
'The imperative of Social Union'. Article about FEPS book 'Europe’s Social Integration: Welfare Models and Economic Transformations' by László Andor.
Após 66 anos de adiamentos, a barragem do Pisão entrou em contra-relógio
by Pùblico 19/08/2023
'After 66 years of postponements, the Pisão dam has entered a race against time' Pùblico's article mentions FEPS Policy Study 'Governing the RRF'
Other cookies are used for Advertisement and Analytics (Sharing on social networks, video playing, analysis and statistics, personalized advertising ...) You can refuse them if you want to. REJECTACCEPTCookie settings