Papers by Carlos Carreira
Small Business Economics
The resources sunk in zombie firms have risen over the last two decades, hampering productivity g... more The resources sunk in zombie firms have risen over the last two decades, hampering productivity growth in developed economies. In this paper, we examine the recovery and exit of zombie firms among small- and medium-sized enterprises (SME), as well as the determinants of these transitions. To our knowledge, this is the first study on the determinants of the probability of a zombie recovering or exiting in a European context. The study also contributes to the discussion of the definition of zombie firms. Based on a panel of Portuguese manufacturing and services firms covering the 2004–2017 period, we do find a widespread presence of zombies. As expected, they are relatively less productive than non-zombies, while the probability of transition into recovery and exit is relatively low, which we interpret as evidence in favour of the presence of high barriers to firm mobility. In turn, the regression results show that downsizing and restructuring, as well as debt restructuring, are cruci...
Research Papers in Economics, 2016
This paper revisits the puzzling question regarding the role of spatial agglomeration of producti... more This paper revisits the puzzling question regarding the role of spatial agglomeration of production activities and knowledge on firms total factor productivity (TFP). In particular, it addresses the overlooked issue of a plausible non-linear effect and different across industries. Using a panel of Portuguese manufacturing firms, we found that specialization economies have a positive impact on firms productivity, especially for those operating in medium-high and high-tech sectors. Diversity externalities, for its part, have an inverted U-shaped relationship with firms TFP in low, medium-low and medium-high tech sectors. The relationship between regional RD in low-tech sector, there is a U-shaped relationship and a positive elasticity for any employment level higher than the 20th percentile. Overall, agglomeration economies differ substantially across industries and they are non-linear.
Even though innovation subsidies and financial constraints are two closely related lines of resea... more Even though innovation subsidies and financial constraints are two closely related lines of research, the link between them is rather unexplored. This paper is, to our knowledge, the first to explicitly analyse both the allocation of innovation subsidies and their role in alleviating firms’ financial constraints. It is not the purpose of the paper to question whether subsidies foster innovation, but rather if: a) subsidies are being correctly allocated to financially constrained firms; b) they effectively reduce financial constraints. We argue that, in addition to the usual “public good” arguments behind the allocation of innovation subsidies, the extent to which firms are able to obtain external funding should not be overlooked. Overall, our results question the allocation and effectiveness of subsidies in alleviating financial constraints of firms willing to innovate. Accordingly, these findings have serious implications on the design of future innovation policy actions.
This paper discusses the impact of newly created firms on industry productivity growth. Our centr... more This paper discusses the impact of newly created firms on industry productivity growth. Our central hypothesis is that there are two potential effects of new firms on productivity growth: a direct effect, as entrants may be relatively more productive than established firms; and an indirect effect, through increased competitive pressure that stimulates incumbents to elevate their productivity in order to survive. The results of the decomposition exercise of aggregate productivity growth suggest that the direct contribution of entry is small. In turn, the regression analysis on the effect of entry on productivity growth of incumbents indicates that the higher is the former, the higher is the latter, which is equivalent to say that the greater is the competitive pressure generated by new entrants, the higher is the expected aggregate productivity level.
This paper is the first to explicitly explore the differences in firms' financial constraints... more This paper is the first to explicitly explore the differences in firms' financial constraints between and within sectors of economic activity, by estimating the sensitivities of cash holdings to cash-flow upon an unique dataset of Portuguese firms. It shows that, not only there are remarkable differences between sectors and, especially, industries, but most importantly, that the commonly accepted inverse relationships between financial constraints and size and age are not robust to sectorial disaggregation.
Tese de doutoramento em Economia (Teoria Economica e Economia Internacional) pela Faculdade de Ec... more Tese de doutoramento em Economia (Teoria Economica e Economia Internacional) pela Faculdade de Economia da Universidade de Coimbra
Under cleansing, productivity-enhancing reallocation is expected to be accelerated in recessions.... more Under cleansing, productivity-enhancing reallocation is expected to be accelerated in recessions. In this paper we contribute to the analysis of one component of the National Systems of Entrepreneurship (namely capital market frictions) by showing that in the extreme scenario of deep recession efficiency in resource reallocation can actually be reduced. Using data from the pronounced Portuguese economic crisis, we do find a spike in firm exit in 2008–2012 vis-à-vis the 2004–2007 pre-crisis period, and a substantial increase in job destruction as well. But we did not find any strong evidence that job reallocation is countercyclical, while a non-negligible fraction of high-productivity firms actually shut down. In turn, our selected proxies for strictness in credit markets reveal that in deep recessions they are seemingly associated with increased firm exit and lower employment creation. Taken in round, our results show that credit market stringency in conjunction with an unfavourable...
Outubro de 1999 Resumo: Este trabalho investiga o grau de economias de escala, os custos marginai... more Outubro de 1999 Resumo: Este trabalho investiga o grau de economias de escala, os custos marginais e os custos médios, nas empresas de telecomunicações móveis digitais, com base na função de custo translog. Os resultados permitem-nos concluir que os operadores estão localizados na zona de economias de escala crescentes e custos marginais decrescentes, tornando-se estes praticamente constantes a partir dos 3,5 milhões de assinantes. Assim, para uma maior eficiência produtiva, este mercado deveria permanecer duopolista.
This article analyzes spatial autocorrelations and the formation of clusters of exports, based on... more This article analyzes spatial autocorrelations and the formation of clusters of exports, based on Research and Development (R&D) intensity in Portugal. The central idea is that exports show relative interdependence and spillover effects among nearby regions and a direct relationship with R&D expenditures. It adopts the new taxonomy of the OECD, separating exports by manufacturing and non-manufacturing activities. Methodologically, is was used Exploratory Spatial Data Analysis (ESDA), utilizing Global Moran's Index and LISA. The results showed the presence of positive spatial autocorrelation of exports and the formation of a cluster of the High-High type for the Porto metropolitan region and Aveiro region. There was no confirmation of positive spatial autocorrelation for R&D expenditures among the regions of Portugal. However, there was both a positive spatial autocorrelation for exports associated with R&D expenditures as well as the formation of a regional cluster with high-hig...
This paper investigates if firms’ size and age, and dividend payment can work as good proxies of ... more This paper investigates if firms’ size and age, and dividend payment can work as good proxies of financial constraints faced by firms. The motivation is that, these proxies have been used by several authors to sort and distinguish firms according to a level of financial distress. To conduct our empirical tests, we make use of two different approaches in order to obtain robust results—first, we estimate the sensitivity of investment to cash-flow, then we employ the sensitivity of cash stocks to cash-flow. Our results, while supporting previous literature on the inverse relationship between size, dividend policy and financial constraints, they cast some doubts on previously devised relationships between age and the level of constraints. Additionally, our results suggest that, contrary to what is commonly accepted, the relationship between size and financial constraints seems to be in general U-shaped.
Recessions and financial crisis increase financial constraints and disproportionally affect const... more Recessions and financial crisis increase financial constraints and disproportionally affect constrained firms. This paper investigates the differences in firms’ financial constraints between sectors using a cash to cash-flow rationale (Almeida et al., 2004) and a firm specific index of constraints (Hovakimien and Hovakimien, 2009). Interpreting higher sensitivities of cash to cash flow as evidence of higher constraints, we find that the relationships between firm size, firm age and constraints are, in general, non-monotonic and not robust to economic sector disaggregation, which contrasts with previous findings.
This paper is a brief survey of recent empirical work on financial constraints faced by firms. It... more This paper is a brief survey of recent empirical work on financial constraints faced by firms. It is organized as a series of stylized results which mirror what is generally understood about severity of financial constraints and effects that they have upon firms. This survey shows that (a) the financial constraint is a widespread key concern for firms, hindering their ability to carry out their optimal investment and growth trajectories and (b) the severity of such constraints depends on institutional and firm specific characteristics, as well as on the nature of investment projects.
Recessions are conventionally considered as times when low-productivity firms are driven out of t... more Recessions are conventionally considered as times when low-productivity firms are driven out of the market. However, in the aftermath of the Great Recession, economic growth in most advanced economies has been unusually anaemic. In an attempt to explain this poor economic performance, we highlight the reduced efficiency in resource reallocation process during deep recessions. The suspect is financial constraints faced by firms. In this study we build a model in which recessions tend to be cleansing only in the absence of strong financial constraints. Since the best projects are deemed to require a higher level of investment, there is a bias towards the funding of projects that are less productive and less financially demanding if times are tight. Using Portuguese longitudinal data for manufacturing, construction and services industries, we do find a spike in firm exit in 2008–2012 vis-à-vis the 2004–2007 pre-recession period. We also found a considerable fraction of high-productivit...
Financial constraints are a determinant factor that hinders firms' ability to carry out their... more Financial constraints are a determinant factor that hinders firms' ability to carry out their investment growth. This chapter aims at analysing the impact of financial constraints upon Portuguese firms over the period 1996-2004, which covers the implementation and convergence towards the common currency. It is well known that firms in economies with less developed financial markets suffer from more severe financial constraints. This is particularly true for the Portuguese economy, as well as transition economies such as Serbia. Several lessons may be learned from the Portuguese case and its past experience of Monetary integration. Our main results indicate that Monetary integration seems to have generally helped reducing the degree of financial constraints faced by Portuguese firms, even though firms were affected differently, depending on their degree of openness to foreign markets.
Handbook of Research on Accounting and Financial Studies
Measuring firms' financial constraints can prove to be a difficult task for researchers becau... more Measuring firms' financial constraints can prove to be a difficult task for researchers because it is not possible to directly observe whether a firm is financially constrained. This chapter surveys the existing methodologies to measure such constraints at firm level, discussing the advantages and disadvantages of each one. In doing so, firstly, the authors review the direct and indirect measures of firms' financial constraints. Then they test the validity of the most commonly used indices using a large panel of (unlisted) Portuguese firms (2010-2017). The FCP index seems to outperform the other indices in capturing financial constraints of unlisted SMEs. This is not a surprising result, as most of the existing empirical literature on the field deals with listed (US) firms. It is not reasonable to expect that the coefficients of indices remain unchanged across countries and over time. Therefore, the authors propose their (re)estimation to apply them to different economies.
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Papers by Carlos Carreira