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Financing Constraints and Investment: New Evidence from Hospital Industry Data

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  • Calem, Paul S
  • Rizzo, John A
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    Abstract

    This paper tests for evidence of financing constraints in the U.S. hospital industry. The authors hypothesize that small hospitals and free-standing hospitals are more likely to face financing constraints than, respectively, large hospitals and members of hospital chains. They estimate the relationship between liquidity and investment within each cohort, controlling for a variety of factors that might affect the marginal profitability of hospital investment. The results provide strong evidence that small hospitals and free-standing hospitals face borrowing constraints due to agency costs. This supports earlier work that found evidence of financing constraints in other contexts. Copyright 1995 by Ohio State University Press.

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    Bibliographic Info

    Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

    Volume (Year): 27 (1995)
    Issue (Month): 4 (November)
    Pages: 1002-14

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    Handle: RePEc:mcb:jmoncb:v:27:y:1995:i:4:p:1002-14

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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    Cited by:
    1. Elias Dedoussis & Afroditi Papadaki, 2010. "Investment spending and corporate governance: Evidence from the ASE listed firms," Managerial Finance, Emerald Group Publishing, vol. 36(3), pages 201-224, March.
    2. Islam, Saiyid S. & Mozumdar, Abon, 2007. "Financial market development and the importance of internal cash: Evidence from international data," Journal of Banking & Finance, Elsevier, vol. 31(3), pages 641-658, March.
    3. Kadapakkam, Palani-Rajan & Kumar, P. C. & Riddick, Leigh A., 1998. "The impact of cash flows and firm size on investment: The international evidence," Journal of Banking & Finance, Elsevier, vol. 22(3), pages 293-320, March.
    4. Latruffe, Laure & Davidova, Sophia & Douarin, Elodie & Gorton, Matthew, 2008. "Can the CAP payments facilitate the growth of individual farms in the New Member States post-EU accession?," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43611, European Association of Agricultural Economists.
    5. Fran├žois-Serge Lhabitant & Olivier Tinguely, 2002. "Financial Constraints and Investment: the Swiss Case," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(II), pages 137-163, June.
    6. Gentry, William M., 2002. "Debt, investment and endowment accumulation: the case of not-for-profit hospitals," Journal of Health Economics, Elsevier, vol. 21(5), pages 845-872, September.
    7. Latruffe, Laure & Davidova, Sophia & Douarin, Elodie & Gorton, Matthew, 2008. "Can the CAP payments facilitate the growth of individual farms in the NMS post-EU accession?," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 36861, Agricultural Economics Society.
    8. Allayannis, George & Mozumdar, Abon, 2004. "The impact of negative cash flow and influential observations on investment-cash flow sensitivity estimates," Journal of Banking & Finance, Elsevier, vol. 28(5), pages 901-930, May.

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