Why Corporations Aren't Investing: Roosevelt Institute Study

March 7th, 2015
in News, econ_news, syndication

Econintersect: An excellent empirical analysis has been published by J.W. Mason of the Roosevelt Institute:  Disgorge the Cash: The Disconnect Between Corporate Borrowing and Investment.  The author points out that there has been an assumption widely held that bank failures and insolvency issues had a relationship to the fall in business investment during and following the Great Financial Crisis of 2008.  This work shows that the investment behavior was consistent with a long-term trend; that argues against an impact from reduced bank lending.  The icing on the cake is the fact that corporate borrowing did not in fact decline; it was investment that declined.  The corporate borrowing was done for other reasons than investment.

roosevelt.institute.logo

Follow up:

Here is a graph from the paper:

borrow.invest.correl.corporations.1952.2012

There are other graphs in the paper that show time variation of correlation over recent decades:

  • Firm-Level Investment-Cash Flow Correlation - Declining

  • Firm-Level Payout-Borrowing Correlation - Increasing

  • Firm-Level Payout-Cash Flow Correlation - Level before 2000, higher since

Econintersect comment:  It appears that the objectives of corporations over the years has clearly changed from building for the future to stripping cash out of the concern.


Click on the title page below to read the entire paper:

disgorge.the.cash.cover

 

Source:









Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.















 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved