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Investment, irreversibility, and financing constraints: Evidence from a panel of transition economies

  • Guariglia, Alessandra
  • Tsoukalas, John
  • Tsoukas, Serafeim

Focusing on a panel of unlisted firms from transition economies, we observe that only firms facing low irreversibility exhibit high and significant investment-cash flow sensitivities. Our findings provide a new explanation for why some financially constrained firms may exhibit low sensitivities.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 117 (2012)
Issue (Month): 3 ()
Pages: 582-584

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Handle: RePEc:eee:ecolet:v:117:y:2012:i:3:p:582-584
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Andrea Caggese, 2003. "Testing Financing Constraints on Firm Investment Using Variable Capital," Working Papers 65, Barcelona Graduate School of Economics.
  2. Robert S. Chirinko & Huntley Schaller, 2008. "The Irreversibility Premium," CESifo Working Paper Series 2265, CESifo Group Munich.
  3. Arellano, Cristina & Bai, Yan & Zhang, Jing, 2012. "Firm dynamics and financial development," Journal of Monetary Economics, Elsevier, vol. 59(6), pages 533-549.
  4. Scaramozzino, Pasquale, 1997. "Investment Irreversibility and Finance Constraints," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(1), pages 89-108, February.
  5. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc.
  6. Christopher F. Baum & Mustafa Caglayan & Oleksandr Talavera, 2008. "On the Investment Sensitivity of Debt under Uncertainty," Boston College Working Papers in Economics 686, Boston College Department of Economics.
  7. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  8. Bayer, Christian, 2008. "On the interaction of financial frictions and fixed capital adjustment costs: Evidence from a panel of German firms," Journal of Economic Dynamics and Control, Elsevier, vol. 32(11), pages 3538-3559, November.
  9. Bond, Stephen & Van Reenen, John, 2007. "Microeconometric Models of Investment and Employment," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 65 Elsevier.
  10. R.T.A. de Haas, 2001. "Financial development and economic growth in transition economies A survey of the theoretical and empirical literature," Research Series Supervision (discontinued) 35, Netherlands Central Bank, Directorate Supervision.
  11. Konings, Jozef & Rizov, Marian & Vandenbussche, Hylke, 2003. "Investment and financial constraints in transition economies: micro evidence from Poland, the Czech Republic, Bulgaria and Romania," Economics Letters, Elsevier, vol. 78(2), pages 253-258, February.
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