Financial systems, financing constraints and investment: empirical analysis of OECD countries
AbstractThis paper investigates the influence of cash flow on corporate investment in 11 OECD countries. We find that the sensitivity of investment levels to internally available funds differs significantly across countries, and is lower in countries with predominantly close bank-firm relationships than in countries with predominantly arm's-length bank-firm relationships. At the same time, we find no relationship of the levels of financial constraints to indicators of overall financial development. Our results are consistent with the view that information and incentive problems in the capital market have important effects on corporate investment, and that close bank-firm relationships can reduce these problems and thus improve the access of firms to external finance.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 38 (2006)
Issue (Month): 17 ()
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- Silvia Giannangeli & Giorgio Fagiolo & Massimo Molinari, 2008. "Financial Structure and Corporate Growth: Evidence from Italian Panel Data," LEM Papers Series 2008/17, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- Martinsson, Gustav, 2009. "Are there Financial Constraints for Firms Investing in Skilled Employees?," Working Paper Series in Economics and Institutions of Innovation 169, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
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