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Enterprise Finance and Investment in Listed Hungarian Firms

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Author Info
Perotti, Enrico C
Vesnaver, Luka

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Abstract

This Paper studies the financing of enterprise investment in listed Hungarian firms during the first years of transition. These firms were selected for listing on the exchange and presumably had better access to external capital. In particular, we look for evidence of financial constraints that limit real investment and attempt to identify the effect of different ownership and governance structures. The empirical results indicate significant financial constraints even among the better-known firms in the period from 1992 to 1998. Consistent with studies from other countries, we find evidence that foreign-owned firms do not suffer from limited external finance. Previous leverage can strain investment, suggesting that hard budget constraints are binding. State ownership does not alleviate capital constraints and larger firms do not appear to be less constrained than the smaller firms, which contrasts with the evidence in Western countries.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4194.

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Date of creation: Jan 2004
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Handle: RePEc:cpr:ceprdp:4194

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Related research
Keywords: financial constraints; foreign investment; governance; transition;

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Find related papers by JEL classification:
G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy
P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  3. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
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    Other versions:
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    Other versions:
  17. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 33-60, February. [Downloadable!] (restricted)
    Other versions:
  18. Gelfer, Stanislav & Perotti, Enrico C, 1999. "Red Barons or Robber Barons? Governance and Financing in Russian FIG," CEPR Discussion Papers 2204, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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    Other versions:
  20. Perotti, Enrico C., 1993. "Bank lending in transition economies," Journal of Banking & Finance, Elsevier, vol. 17(5), pages 1021-1032, September. [Downloadable!] (restricted)
  21. David S. Scharfstein, 1998. "The Dark Side of Internal Capital Markets II: Evidence from Diversified Conglomerates," NBER Working Papers 6352, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Julian Fennema, 2006. "An Alternative Estimation Framework for Firm-Level Capital Investment," CERT Discussion Papers 0602, Centre for Economic Reform and Transformation, Heriot Watt University. [Downloadable!]
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