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Financial Pressure and Balance Sheet Adjustment by Firms *
Author(s) -
Benito Andrew,
Young Garry
Publication year - 2007
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/j.1468-0084.2007.00469.x
Subject(s) - dividend , balance sheet , equity (law) , debt , finance , debt to equity ratio , off balance sheet , business , balance (ability) , equity ratio , investment (military) , economics , monetary economics , financial system , equity capital markets , valuation (finance) , medicine , population , demography , sociology , politics , political science , law , physical medicine and rehabilitation , nonprobability sampling
This paper examines the financial policies and balance sheet adjustment of companies. Using a large panel of UK‐listed firms we consider how companies resolve pressures on their balance sheet, estimating models for dividends, new equity issuance and investment. The results indicate that companies resolve balance sheet pressures by each of these means. Financial policies, through dividends and new equity issuance, and real investment decisions, respond to the underlying level of debt and the borrowing cost of servicing that debt. Dividends are estimated to be slow to adjust in the short run.