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Internal finance and corporate investment: Belgian evidence with panel data

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  • Barran, Fernando
  • Peeters, Marga

Abstract

In this paper the corporate investment decision under financial restrictions is investigated with Belgian firm data from 1984 to 1992. An investment Euler equation is derived from a dynamic optimization model with debt ceilings and an elastic credit supply. The model is estimated by GMM for different firm groups. An important aspect is that the sample is split according to a firm’s association with coordination centers. These centers have become the major external funding source of corporate investment in Belgium since 1986. The estimation results show the dependence of corporate investment on financial factors, both for non-coordination center as well as coordination center firms.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 28504.

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Date of creation: 1998
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Handle: RePEc:pra:mprapa:28504

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Keywords: Investment; corporate; financial; financial restrictions; coordination centers; panel; GMM;

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References

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  1. Toni M. Whited, 1990. "Debt, liquidity constraints, and corporate investment: evidence from panel data," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 114, Board of Governors of the Federal Reserve System (U.S.).
  2. R. Glenn Hubbard & Anil K Kashyap & Toni M. Whited, 1993. "Internal Finance and Firm Investment," NBER Working Papers 4392, National Bureau of Economic Research, Inc.
  3. Ángel Estrada & Javier Vallés, 1995. "Investment and Financial Costs: Spanish Evidence with Panel Data," Banco de Espa�a Working Papers, Banco de Espa�a 9506, Banco de Espa�a.
  4. Hayne E. Leland and David H. Pyle., 1976. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Research Program in Finance Working Papers, University of California at Berkeley 41, University of California at Berkeley.
  5. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989. "Corporate structure, liquidity, and investment: evidence from Japanese industrial groups," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 82, Board of Governors of the Federal Reserve System (U.S.).
  6. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  7. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  8. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, Elsevier, vol. 13(2), pages 187-221, June.
  9. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  10. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  11. repec:fth:baesse:9506 is not listed on IDEAS
  12. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, American Finance Association, vol. 39(3), pages 575-92, July.
  13. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  14. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 1029-54, July.
  15. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  16. Stephen Bond & Costas Meghir, 1990. "Dynamic Investment Models and the Firm's Financial Policy," CEPR Financial Markets Paper, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ 0013, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ.
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Citations

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Cited by:
  1. Chatelain, J.-B. & Teurlai, J.-C., 2001. "Pitfalls in Investment Euler Equations," Working papers, Banque de France 81, Banque de France.
  2. Jean-Bernard Chatelain, 2003. "Structural Modelling of Financial Constraints on Investment: Where Do We Stand?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers), HAL halshs-00112522, HAL.
  3. Paul Butzen & Catherine Fuss & Philip Vermeulen, 2001. "The interest rate and credit channels in Belgium: an investigation with micro-level firm data," Working Paper Research, National Bank of Belgium 18, National Bank of Belgium.
  4. Peeters, Marga, 1997. "Does demand and price uncertainty affect Belgian and Spanish corporate investment?," MPRA Paper 23604, University Library of Munich, Germany.
  5. Kakes, Jan, 1998. "Monetary transmission and business cycle asymmetry," Research Report, University of Groningen, Research Institute SOM (Systems, Organisations and Management) 98C36, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  6. Jean-Christophe Teurlai, 2003. "Investissement corporel et coût du financement externe : identification de différents régimes et rôle du crédit-bail," Économie et Prévision, Programme National Persée, Programme National Persée, vol. 157(1), pages 51-70.
  7. repec:hal:journl:halshs-00112522 is not listed on IDEAS
  8. Chatelain, Jean-Bernard & Teurlai, Jean-Christophe, 2006. "Euler investment equation, leverage and cash flow misspecification: An empirical analysis on a panel of French manufacturing firms," Journal of Macroeconomics, Elsevier, Elsevier, vol. 28(2), pages 361-374, June.

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