Financial distress and cycle-sensitive corporate investments

Artikel

This paper attempts to explain the link between corporate investments in different phases of the economic cycle and company financial distress. The data were derived from the Estonian Centre of Registers and Information Systems and contained the population of Estonian businesses from four economic activity areas – manufacturing; wholesale and retail trade; transportation and storage; and construction and real estate – and covered the period from 1995 to 2010. A firm was defined as distressed if it breached the minimum capital requirements set by law. The results demonstrate that all the investment-related factors matter for financial distress, with timing, intensity, sector, and type of investment all playing a role. Furthermore, the data seem to suggest that investment in tangibles is more cycle-sensitive for the transport and construction and real estate sectors and investment in working capital is more cycle-sensitive for manufacturing and merchandise, which stresses the importance of getting the timing right for different investment types in different industries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Baltic Journal of Economics ; ISSN: 2334-4385 ; Volume: 14 ; Year: 2014 ; Issue: 1-2 ; Pages: 181-193 ; London: Taylor & Francis

Classification and Topics

• Classification: Wirtschaft ; Financial Crises ; Capital Budgeting; Fixed Investment and Inventory Studies; Capacity ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: company investments ; corporate distress ; cyclicality

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Maripuu, Peeter ; Männasoo, Kadri
• Event: Veröffentlichung
• (who): Taylor & Francis
• (where): London
• (when): 2014

Further information

• DOI: doi:10.1080/1406099X.2014.999481
• Handle: http://hdl.handle.net/10419/180078
• Last update: 16.03.2025, 5:45 AM CET