Investment and Financing Constraints: What Does the Data Tell?

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Investment and Financing Constraints: What Does the Data Tell?

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Vermeulen, Philip () (European Central Bank)

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Philip Vermeulen

Abstract

This paper analyses the presence of financing constraints in a large panel of German, French, Italian and Spanish firms. Nonparametric kernel density estimates of the difference between investment and cash flow are obtained. It is found that the density of this difference has a mode just below zero, indicating a clustering of firms investing at a level just below cash flow, indicating a cash flow constraint. It is shown that those firms investing an amount around their cash flow pay on average higher interest rates and have lower cash reserves, providing further evidence that these firms are indeed constrained.

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Paper provided by United Nations University, Institute for New Technologies in its series EIFC - Technology and Finance Working Papers with number 25.

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Date of creation: 2003
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Handle: RePEc:dgr:unutaf:eifc03-25

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This paper has been announced in the following NEP Reports:

NEP-FIN-2003-07-10 (Finance)
NEP-MAC-2003-07-10 (Macroeconomics)
NEP-MFD-2003-07-10 (Microfinance)

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Annalisa Ferrando & Rozália Pál, 2006. "Financing constraints and firms’ cash policy in the euro area," Working Paper Series 642, European Central Bank. [Downloadable!]

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This page was last updated on 2009-12-2.

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