Biting the hand that fed it: Did the stock market boom of the late 1990s impede investment in manufacturing? |
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Authors: | Christian E. Weller Brooke Helppie |
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Affiliation: | (1) Department of Applied Economics I, University Rey Juan Carlos, C/ Tren de Arganda 8D 5C, 28032 Madrid, Spain |
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Abstract: | The stock market increase in the 1990s may have diverted funds from fixed investments in manufacturing to other investiments, such as share repurchases, and to firms with faster stock price gains. We find that overall investment remained lower than it could have been without the stock price appreciation. We also find that manufacturing investment was impeded by the developments in the stock market. Based on our results, the policy focus should be on offering incentives for corporate decision makers to prioritize productive investments over other uses of funds instead of means to entice lenders to increase lending to manufacturing firms. |
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