Advanced Search
MyIDEAS: Login to save this paper or follow this series

Investment and financing constraints: importance of the business cycle - An estimation on French data

Contents:

Author Info

  • B. CREPON

    (Insee)

  • F. ROSENWALD

    (Ensae)

Abstract

In this paper we study the influence of financial constraints on the investment behavior of French firms by estimating the Euler equation for investment on a large panel of firms over the period 1986-1994. In particular we emphasize the impact of the firm's level of collateral on its external financial cost. We assume that the rate at which the firm can borrow is linked to the firm's debt to tangible fixed assets ratio through a premium added to the safe interest rate. We derive the Euler equation from a structural model of investment and estimate our model on data on individual French firms from 1987 to 1994 by using generalized method of moments (GMM). Our empirical findings show that the level of the firm's collateral explains significant differences in the investment behavior of firms. Moreover this effect is found to vary across different subsamples of firms, divided according to size or sector, but also during the business cycle. Compared to the safe interest rate the external financing premium appears significant especially at the end of the period studied. However compared to the economic return on investment the external premium does not appear significant in most cases. So the external financing appears to play a significant role only for small industrial firms and only at the end of period.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.insee.fr/fr/publications-et-services/docs_doc_travail/G2000-05.pdf
File Function: Document de travail de la DESE numéro G2000-05
Download Restriction: no

Bibliographic Info

Paper provided by Institut National de la Statistique et des Etudes Economiques, DESE in its series Documents de Travail de la DESE - Working Papers of the DESE with number g2000-05.

as in new window
Length:
Date of creation: 2000
Date of revision:
Handle: RePEc:crs:wpdeee:g2000-05

Contact details of provider:
Postal: 15 Boulevard Gabriel Peri 92244 Malakoff Cedex
Phone: 01 41 17 50 50
Email:
Web page: http://www.insee.fr
More information through EDIRC

Related research

Keywords: firmsinvestment behavior; financial constraints; financial accelerator;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:crs:wpdeee:g2000-05. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (D3E).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.