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Title: Excess Leverage and Productivity Growth in Emerging Economies: Is There A Threshold Effect?

Author(s): Fabrizio Coricelli, Nigel Driffield, Sarmistha Pal and Isabelle Roland

Publication Date: December 2009

Keyword(s): Excess Leverage, TFP growth and Threshold model

Programme Area(s): International Macroeconomics

Abstract: This paper studies the relationship between leverage and growth, focusing on a large sample of firms in emerging economies of central and eastern Europe (CEE). Contrary to the general wisdom, we find that deviation from optimal leverage, especially excess leverage, is common among firms in many CEE countries. Using firm-level panel data, the paper provides support to the hypothesis that leverage positively affects productivity growth but only below an endogenously determined threshold level.

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Bibliographic Reference

Coricelli, F, Driffield, N, Pal, S and Roland, I. 2009. 'Excess Leverage and Productivity Growth in Emerging Economies: Is There A Threshold Effect?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7617