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Do natural resource sectors rely less on external finance than manufacturing sectors?

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  • Hattendorff, Christian

Abstract

The finding that industrial sectors differ in their dependence on external finance for sector-specific technological reasons and, thus, rely to a different degree on financial development has become a major concept in studies conducted on both growth and trade. Although natural resources might play an important role in each of these fields, research on industries' financial dependence has been limited so far to manufacturing. By focusing on the natural resource sectors, the present paper aims to close this gap in its analysis. It rejects the common view that the natural resource industry in particular is less dependent on the financial system, and finds that the results of the analysis depend on the specific measure being applied. Measures relating investment and cash flow indicate high external dependence, while measures accounting for more short-term liquidity needs demonstrate rather low external dependence of natural resource firms. These results do not change considerably over time or across countries.

Suggested Citation

  • Hattendorff, Christian, 2012. "Do natural resource sectors rely less on external finance than manufacturing sectors?," SFB 649 Discussion Papers 2012-050, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    • Handle: RePEc:zbw:sfb649:sfb649dp2012-050
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    References listed on IDEAS

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    1. Beck, Thorsten, 2002. "Financial development and international trade: Is there a link?," Journal of International Economics, Elsevier, vol. 57(1), pages 107-131, June.
    2. Raddatz, Claudio, 2006. "Liquidity needs and vulnerability to financial underdevelopment," Journal of Financial Economics, Elsevier, vol. 80(3), pages 677-722, June.
    3. Eichengreen, Barry & Gullapalli, Rachita & Panizza, Ugo, 2011. "Capital account liberalization, financial development and industry growth: A synthetic view," Journal of International Money and Finance, Elsevier, vol. 30(6), pages 1090-1106, October.
    4. Thorsten Beck & Asli Demirgüç-Kunt, 2004. "SMEs, Growth, and Poverty," World Bank Publications - Reports 11278, The World Bank Group.
    5. repec:hal:spmain:info:hdl:2441/106i379teb8moplr2gknsi2nfd is not listed on IDEAS
    6. Randall S. Kroszner, 2007. "Analyzing and assessing banking crises," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
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    Cited by:

    1. Hattendorff, Christian, 2014. "Natural resources, demand for external finance and financial development," Discussion Papers 2014/33, Free University Berlin, School of Business & Economics.

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    More about this item

    Keywords

    Financial development; external dependence; natural resources;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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