On the Real Effect of Financial Pressure: Evidence From Firm‐Level Employment During the Euro‐Area Crisis

Abstract

Using a large panel of mainly unquoted euro-area firms over the period 2003-2011, this paper examines the impact of financial pressure on firms' employment. The analysis finds evidence that financial pressure negatively affects firms' employment decisions. This effect is stronger during the euro area-crisis (2010-2011), especially for firms in the periphery compared to their counterparts in non-periphery European economies. When we introduce firm-level heterogeneity, we show that financial pressure appears to be both statistically and quantitatively more important for bank-dependent, small and privately held firms operating in periphery economies during the crisis. JEL Classification numbers: G32; D22; E22; E44 . *We are grateful to Francesco Zanetti (Editor) and three anonymous referees for useful comments and suggestions. We also thank Nikos Giannakopoulos, Sotirios Kokas and participants at the Financial Engineering and Banking

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Working capital management, financial constraints and exports: evidence from European and US manufacturers

“…This subsection discusses the indicators of financial constraints used in this article: (i) the Hadlock and Pierce ( 2010 ) SA index, (ii) the Whited and Wu ( 2006 ) index and (iii) the interest burden indicator (see Spaliara 2009 ; Chen and Guariglia 2013 ; Fernandes et al. 2019 ).…”

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