Financing Constrains as Determinants of the Investment Behaviour of Estonian Firms
Lack of financing is arguably the main obstacle for making profitable investments in transition economies. In this paper we investigate whether there is underinvestment due to financing constraints in Estonian manufacturing firms. Firm level panel data from 1995 through 1998 with several items from financial statements were used. The unique data includes many very small firms with assets less than 1 million USD that are often not explored in empirical studies. The existence of liquidity constraints was tested with estimating regression coefficients of inside - firm financing from reduced form investment regressions and using the investment Euler equation. Results show that internal finance played a bigger role for investments made by small firms and firms owned by domestic (non-foreign) capital. The only exception is that in the Euler equation, cash flow influenced investments more for small than for large foreign firms. The results imply that foreign direct investments and lower corporate income taxes can promote investments through the relaxation of liquidity constraints.
Volume (Year): 3 (2002)
Issue (Month): 1 (December)
|Contact details of provider:|| Postal: |
Phone: +371 67039320
Fax: +371 67039318
Web page: http://www.biceps.org
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:bic:journl:v:3:y:2002:i:1:p:8-30. 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: (Lelde Ivankova)
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.