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Investment, irreversibility, and financing constraints: Evidence from a panel of transition economies

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  • Guariglia, Alessandra
  • Tsoukalas, John
  • Tsoukas, Serafeim

Abstract

Focusing on a panel of unlisted firms from transition economies, we observe that only firms facing low irreversibility exhibit high and significant investment-cash flow sensitivities. Our findings provide a new explanation for why some financially constrained firms may exhibit low sensitivities.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 117 (2012)
Issue (Month): 3 ()
Pages: 582-584

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Handle: RePEc:eee:ecolet:v:117:y:2012:i:3:p:582-584

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Investment; Irreversibility; Cash flow; Financing constraints;

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References

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  1. Bayer, Christian, 2008. "On the interaction of financial frictions and fixed capital adjustment costs: Evidence from a panel of German firms," Journal of Economic Dynamics and Control, Elsevier, vol. 32(11), pages 3538-3559, November.
  2. Yan Bai & Jing Zhang & Cristina Arellano, 2009. "Firm Dynamics and Financial Development," 2009 Meeting Papers 152, Society for Economic Dynamics.
  3. Scaramozzino, Pasquale, 1997. "Investment Irreversibility and Finance Constraints," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(1), pages 89-108, February.
  4. Andrea Caggese, 2003. "Testing financing constraints on firm investment using variable capital," Economics Working Papers 1009, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2006.
  5. Baum, Christopher F. & Caglayan, Mustafa & Talavera, Oleksandr, 2010. "On the investment sensitivity of debt under uncertainty," Economics Letters, Elsevier, vol. 106(1), pages 25-27, January.
  6. Robert S. Chirinko & Huntley Schaller, 2008. "The Irreversibility Premium," CESifo Working Paper Series 2265, CESifo Group Munich.
  7. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, 05.
  8. Konings, Jozef & Rizov, Marian & Vandenbussche, Hylke, 2003. "Investment and financial constraints in transition economies: micro evidence from Poland, the Czech Republic, Bulgaria and Romania," Economics Letters, Elsevier, vol. 78(2), pages 253-258, February.
  9. Bond, Stephen & Van Reenen, John, 2007. "Microeconometric Models of Investment and Employment," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 65 Elsevier.
  10. R.T.A. de Haas, 2001. "Financial development and economic growth in transition economies A survey of the theoretical and empirical literature," Research Series Supervision (discontinued) 35, Netherlands Central Bank, Directorate Supervision.
  11. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
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Cited by:
  1. Eleftherios Goulas & Athina Zervoyianni, 2013. "The Growth-Crime Relationship: Are There any Asymmetries?," Working Paper Series 54_13, The Rimini Centre for Economic Analysis.
  2. Eleftherios Goulas & Athina Zervoyianni, 2013. "Growth, Deficits and Uncertainty: Theoretical Aspects and Empirical Evidence," Working Paper Series 53_13, The Rimini Centre for Economic Analysis.

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