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Financial Constraints and Investment: the Swiss Case

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  • François-Serge Lhabitant
  • Olivier Tinguely
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    Abstract

    We study the empirical link that exists between investment-cash flow sensitivities and financial constraints in the Swiss financial market. We follow the standard approach introduced by FAZARRI, HUBBARD and PETERSON (1988), but improve it by using a dynamic classification of firms, a new estimation procedure, while paying particular attention to information asymmetry indicators. We observe that investment-cash flow sensitivities are homogeneous among firms during boom periods, as in KAPLAN and ZINGALES (1995), but heterogeneous during recession periods. The link between investment-cash flow sensitivities and the intensity of financing constraints is monotonically increasing, as in FAZARRI, HUBBARD and PETERSON (1988).

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    Bibliographic Info

    Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

    Volume (Year): 138 (2002)
    Issue (Month): II (June)
    Pages: 137-163

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    Handle: RePEc:ses:arsjes:2002-ii-3

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    Postal: c/o SNB/BNS, Börsenstrasse 15, PO Box 2800, CH-8022 Zürich
    Phone: +41 (0)44 631 32 34
    Fax: +41 (0)44 631 39 01
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    Web page: http://www.sjes.ch
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    Related research

    Keywords: financial constraints; investment; Tobin Q;

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    References

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