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Biting the hand that fed it: Did the stock market boom of the late 1990s impede investment in manufacturing?

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  • Christian Weller
  • Brooke Helppie

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. Copyright Springer 2005

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  • Christian Weller & Brooke Helppie, 2005. "Biting the hand that fed it: Did the stock market boom of the late 1990s impede investment in manufacturing?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 29(3), pages 359-381, September.
    • Handle: RePEc:spr:jecfin:v:29:y:2005:i:3:p:359-381
    DOI: 10.1007/BF02761580
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    References listed on IDEAS

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    4. Leonce Ndikumana, 1999. "Debt Service, Financing Constraints, and Fixed Investment: Evidence from Panel Data," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 21(3), pages 455-478, March.
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