Braun, M., & Larrain, B. (2005). Finance and the business cycle: international, inter‐industry evidence

Braun, M., & Larrain, B. (2005). Finance and the business cycle: international, inter‐industry evidence. The Journal of Finance, 60(3), 1097-1128.

Abstract

By considering yearly production growth rates for several manufacturing in more than 100 countries during (roughly) the last 40 years, we show that that are more dependent on external finance are hit harder during recessions. observed difference in the behavior of industries is larger when financial frictions thought to be more prevalent, linking the result directly to the financial mechanism hypothesis. In particular, more dependent industries are more strongly affected recessions when they are located in countries with poor financial contractibility, when their assets are softer or less protective.