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Finance, uncertainty and investment: assessing the gains and losses of a generalized non linear structural approach using Belgian panel data

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Author Info
Marcel Gérard () (FUCAM, ARPEGE, Université Catholique de Louvain, IAG)
Frédéric Verscueren () (FUCAM, ARPEGE, University of Lille III, GREMARS)

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Abstract

Using panel data for 2,329 Belgian firms observed between 1985 and 1999, this paper aims at getting a better understanding of Belgian firms' investment behavior. Two main and interrelated topics are investigated: the link between financial structure and investment decision, on the one hand, the effect of uncertainty on the level of investment, on the other hand. Such research sets forth the effect of some key variables, both in terms of level and volatility. The study is conducted within a structural approach but reduced form equations are also estimated. A generalised dynamic effect is investigated by introducing adjustment costs related through time. From that study, it clearly appears that small firms and high debt level firms are more sensitive to interest rate and cash flow. However, no role for investment price volatility is observed.

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Paper provided by National Bank of Belgium in its series Research series with number 200205-7.

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Length: 38 pages
Date of creation: May 2002
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Handle: RePEc:nbb:reswpp:200205-7

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Related research
Keywords: Investment; debt constraint; panel data; GMM;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity

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  35. Michele Cincera, 2002. "Financing constraints, fixed capital and R&D investment decisions of belgian firms," Research series 200205-13, National Bank of Belgium. [Downloadable!]
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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. Nancy Masschelein, 2007. "Monitoring pro-cyclicality under the capital requirements directive : preliminary concepts for developing a framework," Documents series 200711-22, National Bank of Belgium. [Downloadable!]
  2. Annick Bruggeman, 2007. "Can Excess Liquidity Signal an Asset Price Boom?," Research series 200708-08, National Bank of Belgium. [Downloadable!]
  3. Frédéric Lagneaux, 2008. "Economic Importance of Belgian Transport Logistics," Documents series 200801-01, National Bank of Belgium. [Downloadable!]
  4. Helga De Doncker, 2006. "R&D in the Belgian Pharmaceutical Sector," Documents series 200612-1, National Bank of Belgium. [Downloadable!]
  5. Jean-Bernard Chatelain, 2003. "Structural Modelling of FinancialConstraints on Investment: Where Do WeStand?," Post-Print halshs-00112522_v1, HAL. [Downloadable!]
  6. Joachim Keller, 2008. "Agency problems in structured finance – a case study of European CLOs," Documents series 200808-22, National Bank of Belgium. [Downloadable!]
  7. Philippe Moës, 2006. "The production function approach to the Belgian output gap, Estimation of a Multivariate Structural Time Series Model," Research series 200609-1, National Bank of Belgium. [Downloadable!]
    Other versions:
  8. Olivier Blanchard & Jordi Gali, 2006. "A new Keynesian model with unemployment," Research series 200610-4, National Bank of Belgium. [Downloadable!]
    Other versions:
  9. Carine Swartenbroekx, 2007. "The gas chain : influence of its specificities on the liberalisation process," Documents series 200711-24, National Bank of Belgium. [Downloadable!]
  10. Joseph Plasmans & Tomasz Michalak & Jorge Fornero, 2006. "Simulation, estimation and welfare implications of monetary policies in a 3-country NOEM model," Research series 200610-6, National Bank of Belgium. [Downloadable!]
  11. Philippe Moës, 2008. "Multivariate structural time series models with dual cycles : implications for measurement of output gap and potential growth," Research series 200808-20, National Bank of Belgium. [Downloadable!]
  12. François Coppens & Fernando Gonzáles & Gerhard Winkler, 2007. "The performance of credit rating systems in the assessment of collateral used in Eurosystem monetary policy operations," Research series 200710-12, National Bank of Belgium. [Downloadable!]
    Other versions:
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