Abstract
We explore one specific channel through which finance promotes growth: the allocation of capital. Using international industrial data, we find that countries with developed financial markets invest more in growing industries, and pull out more funds of declining ones. Most interestingly, this pattern is more eminent for those industries more dependent on external financing. Various robustness checks show that the results are not driven by reverse causality, omitted variables, specific countries or industries. © 2008 Elsevier B.V. All rights reserved.
| Original language | English |
|---|---|
| Pages (from-to) | 810-818 |
| Journal | Journal of Banking and Finance |
| Volume | 33 |
| Issue number | 5 |
| DOIs | |
| Publication status | Published - May 2009 |
| Externally published | Yes |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 9 Industry, Innovation, and Infrastructure
Research Keywords
- Capital allocation
- Financial dependence
- Financial development
- Investment
Policy Impact
- Cited in Policy Documents
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