Working Papers

S. Mohades, G. Piccillo, M. Savona, T. Treibich – Firms’ Investment & Capacity Utilisation: The Role of Financial Constraints and Uncertainty

This paper explores why Italian companies decide to invest and how this depends on their production capacity. We find that firms running near full capacity are more likely to invest, especially larger companies. Surprisingly, uncertainty in the economy does not deter high-capacity firms from investing; instead, it can even encourage investment among companies which utilise less of their capacity. Our results suggest that supporting firms at key points in their growth could help boost investment and strengthen the Italian economy.

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