Financialization and investment dynamics of Non-Financial Firms in Latin America (2000 -2015)

JUAN EDUARDO SANTARCANGELO; NICOLÁS ZEOLLA

Buenos Aires

Conferencia; Conferencia Internacional Financiarización y Desarrollo en el Sur Global; 2019

CLACSP-CCC-SOMO

There is a vast literature that account for the negative effects on investment of financializationon Non-Financial Companies (NFC) in developed countries. In these, dividend payments andfinancial benefits are channels that negatively affect productive investment. However, veryfew studies have analyzed the effects of financialization on the productive investment of NFCin Latin America.Based on balance sheets and systematized information of large companies, the objective ofthis paper is to explore the validity of the financialization approach in the study of thedeterminants of productive investment in the main seven Latin American Countries (LAC7)between the years 2000 to 2015. In order to do this, we built a panel and estimated a standardmodel of investment determinants based on the firm's internal liquidity theory to which weincorporate some specific financialization controls. The GMM methodology is used to treatendogeneity problems, with fixed effects by country and year.In general, the usual controls such as sales, operating profits, debt, q-tobin and cash have theexpected signs and significance in the standard models of investment determinants. Inparticular, and similar to the evidence of financialization in developed countries, we find thatthe payment of dividends, the possession of financial assets and financial benefits havenegative effects on productive investment. However, these results are not homogeneous forall companies and sub-periods. As a specificity of Latin America, the effects offinancialization are only significant for the group of large companies and after the year 2000.For smaller companies and some sub-periods, financial gains have positive effects oninvestment.