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Consequences of firms'relational financing in the aftermath of the 1995 Mexican banking crisis



This paper shows that, in the aftermath of the 1995 banking crisis, relational financing was a two-edged sword for firms listed on the Mexican Securities Market. On the negative side, only bank-linked firms observed on average a dependence on cash stock to finance their investment projects. On the positive side, the banking connection was important to boost their profit rates during the 1997-2000 period, at least for financially healthy firms. These econometric results are derived from dynamic panel data models of investment and profit rates, which are estimated by the Generalized Method of Moments, where level and difference equations are combined into a system.

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  • Gonzalo Castañeda, 2005. "Consequences of firms'relational financing in the aftermath of the 1995 Mexican banking crisis," Journal of Applied Economics, Universidad del CEMA, vol. 8, pages 53-79, May.
  • Handle: RePEc:cem:jaecon:v:8:y:2005:n:1:p:53-79

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    References listed on IDEAS

    1. Castillo Ponce, Ramón A., 2003. "Las restricciones de liquidez, el canal de crédito y la inversión en México," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(278), pages 315-342, abril-jun.
    2. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    3. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    4. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    5. Gelos, R. Gaston & Werner, Alejandro M., 2002. "Financial liberalization, credit constraints, and collateral: investment in the Mexican manufacturing sector," Journal of Development Economics, Elsevier, vol. 67(1), pages 1-27, February.
    6. Gande, Amar, et al, 1997. "Bank Underwriting of Debt Securities: Modern Evidence," Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 1175-1202.
    7. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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    More about this item


    relational financing; banking crisis; internal capital markets;

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • N26 - Economic History - - Financial Markets and Institutions - - - Latin America; Caribbean


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