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Financial frictions and the K/L ratio in UK manufacturing industries

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posted on 2010-03-26, 14:42 authored by Marina-Eliza Spaliara
Using comprehensive financial data on UK unquoted firms, we investigate whether technological differences of UK manufacturing industries influence the response of firms' capital-labour ratio (K/L) to changes in financial indicators under capital market imperfections. The results reveal that cash flow has a positive impact on the K/L ratio for constrained firms in high tech industries and a negative impact for firms with similar characteristics in low tech industries. Specifically, the sensitivity of the K/L ratio to cash flow not only depends on firms' net worth and financial frictions, but most importantly on firms' industry affiliation.

History

School

  • Business and Economics

Department

  • Economics

Publisher

© Loughborough University

Version

  • VoR (Version of Record)

Publication date

2010

Notes

This working paper is also available at: http://ideas.repec.org/p/lbo/lbowps/2010-07.html

ISSN

1750-4171

Book series

Loughborough University. Department of Economics. Discussion Paper Series;WP 2010 - 07

Language

  • en

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