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Corporate Financial Leverage in Canadian Manufacturing: Consequences for Employment and Inventories

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  • Heisz, Andrew
  • Larochelle-Cote, Sebastien

Abstract

This paper investigates the link between financial structure and employment growth, and the link between financial structure and inventory growth, among incorporated Canadian manufacturers from 1988 to 1997. It finds that financially vulnerable firms - smaller firms and those with higher leverage - shed nearly 10% more labour than financially healthier firms for a given drop in product demand. The influence was larger during the recession of 1990 to 1992 indicating that higher financial vulnerability, reflected in high leverage, may have worsened during that period. The influence was also greater in sectors that experienced larger cyclical fluctuations. On average, firms with high leverage also tend to cut inventories 5% more when a shock in demand occurs.

Suggested Citation

  • Heisz, Andrew & Larochelle-Cote, Sebastien, 2004. "Corporate Financial Leverage in Canadian Manufacturing: Consequences for Employment and Inventories," Analytical Studies Branch Research Paper Series 2004217e, Statistics Canada, Analytical Studies Branch.
    • Handle: RePEc:stc:stcp3e:2004217e
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    File URL: https://www150.statcan.gc.ca/n1/en/catalogue/11F0019M2004217
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    References listed on IDEAS

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    Cited by:

    1. Larochelle-Cote, Sebastien, 2005. "Summary Of: Tariff Reduction and Employment in Canadian Manufacturing, 1988-1994," Analytical Studies Branch Research Paper Series 2005259e, Statistics Canada, Analytical Studies Branch.
    2. Huo, Da & Chaudhry, Hassan Rauf, 2021. "Using machine learning for evaluating global expansion location decisions: An analysis of Chinese manufacturing sector," Technological Forecasting and Social Change, Elsevier, vol. 163(C).
    3. Sébastien LaRochelle‐Côté, 2007. "Tariff reduction and employment in Canadian manufacturing," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(3), pages 843-860, August.

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    Keywords

    Business performance and ownership; Current conditions; Financial statements and performance; Industries; Labour; Manufacturing;
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