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Investment in Segmented Capital Markets

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  • Nabi, Ijaz
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    Abstract

    This paper analyzes differences in the investment behavior of firms with unequal access to the capital market. Using empirical evidence from Pakistan, characteristics of formal and informal capital markets are described. Probabilities are estimated for firms being selected in the formal capital market where credit is cheap. Investment behavior is then analyzed using a switching regressions model. It is concluded that "favored" firms use more capital-intensive technologies and realize their investment plans more quickly than "excluded" firms do. Investment determinants related to entrepreneurial features are also identified. Copyright 1989, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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    Bibliographic Info

    Article provided by MIT Press in its journal Quarterly Journal of Economics.

    Volume (Year): 104 (1989)
    Issue (Month): 3 (August)
    Pages: 453-62

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    Handle: RePEc:tpr:qjecon:v:104:y:1989:i:3:p:453-62

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    Web page: http://mitpress.mit.edu/journals/

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    Web: http://mitpress.mit.edu/journal-home.tcl?issn=00335533

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    Cited by:
    1. Gelos, R. Gaston & Werner, Alejandro M., 2002. "Financial liberalization, credit constraints, and collateral: investment in the Mexican manufacturing sector," Journal of Development Economics, Elsevier, vol. 67(1), pages 1-27, February.
    2. Haramillo, Fidel & Schiantarelli, Fabio & Weiss, Andrew, 1996. "Capital market imperfections before and after financial liberalization: An Euler equation approach to panel data for Ecuadorian firms," Journal of Development Economics, Elsevier, vol. 51(2), pages 367-386, December.
    3. Rajesh Raj, Seethamma Natarajan, 2007. "Technical Efficiency in the Informal Manufacturing Enterprises: Firm level evidence from an Indian state," MPRA Paper 7816, University Library of Munich, Germany.
    4. Burki, Abid A. & Terrell, Dek, 1998. "Measuring production efficiency of small firms in Pakistan," World Development, Elsevier, vol. 26(1), pages 155-169, January.
    5. Thierry Tressel, 1999. "Financial Intermediation and Growth: Long Run Consequences of Capital Market Imperfections," CSEF Working Papers 20, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    6. Hobdari, Bersant & Jones, Derek C. & Mygind, Niels, 2009. "Capital investment and determinants of financial constraints in Estonia," Economic Systems, Elsevier, vol. 33(4), pages 344-359, December.
    7. Heikki Heino, 2006. "Use of borrowed start-up capital and micro enterprises in Mexico: existence of liquidity constraints," Portuguese Economic Journal, Springer, vol. 5(1), pages 1-30, May.
    8. Steinbuks, J., 2008. "Financial constraints and firms' investment: results of a natural experiment measuring firm response to power interruption," Cambridge Working Papers in Economics 0844, Faculty of Economics, University of Cambridge.
    9. Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Bernard Gauthier & Jan Willem Gunning & Måns Söderbom & Abena Oduro & Remco Oostendorp & Cathy Pattillo & Francis Teal & Albert Zeufa, 2000. "Credit constraints in manufacturing enterprises in Africa," CSAE Working Paper Series 2000-24, Centre for the Study of African Economies, University of Oxford.
    10. Francis Teal & Stefan Dercon & Måns Söderbom, 1997. "Investment in Africa`s manufacturing sector: a four-country panel data analysis," Economics Series Working Papers WPS/1997-11, University of Oxford, Department of Economics.
    11. Tressel, Thierry, 2003. " Dual Financial Systems and Inequalities in Economic Development," Journal of Economic Growth, Springer, vol. 8(2), pages 223-57, June.
    12. Samuel, Cherian, 1996. "Internal finance and investment : another look," Policy Research Working Paper Series 1663, The World Bank.
    13. Harris, John R. & Schiantarelli, Fabio & Siregar, Miranda G., 1992. "How financial liberalization in Indonesia affected firms'capital structure and investment decisions," Policy Research Working Paper Series 997, The World Bank.
    14. Hallward-Driemeier, Mary, 2001. "Firm-level survey provides data on Asia's corporate crisis and recovery," Policy Research Working Paper Series 2515, The World Bank.
    15. Chow, Clement Kong-Wing & Fung, Michael Ka Yiu, 2000. "Small businesses and liquidity constraints in financing business investment: Evidence from shanghai's manufacturing sector," Journal of Business Venturing, Elsevier, vol. 15(4), pages 363-383, July.
    16. Samuel, Cherian, 1996. "Stock market and investment : the signaling role of the market," Policy Research Working Paper Series 1612, The World Bank.
    17. Rajesh Natarajan & Malathy Duraisamy, 2008. "Efficiency and productivity in the Indian unorganized manufacturing sector: did reforms matter?," International Review of Economics, Springer, vol. 55(4), pages 373-399, December.
    18. Poon, Winnie P. H. & Firth, Michael & Fung, Hung-Gay, 1998. "Asset pricing in segmented capital markets: Preliminary evidence from China-domiciled companies," Pacific-Basin Finance Journal, Elsevier, vol. 6(3-4), pages 307-319, August.

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