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Are measures of corporate financial constraints universal? Evidence from Brazil

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  • Balan, Philipe
  • Norden, Lars

Abstract

Financial constraints are a major impediment to economic growth. However, virtually all measures are calibrated with U.S. data and it is therefore not clear whether they work in other jurisdictions. Using data from Brazil during 1996–2022, we test how informative the KZ and SA indices are. We estimate panel regression models of corporate asset growth, market-to-book ratio, payout ratio and ROA on these indices. We find both indices exhibit the expected signs and are significantly related to these corporate outcomes. Finally, our models exhibit a better fit when we use data from the post-IFRS adoption period of Brazilian firms.

Suggested Citation

  • Balan, Philipe & Norden, Lars, 2024. "Are measures of corporate financial constraints universal? Evidence from Brazil," Finance Research Letters, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324013825
    DOI: 10.1016/j.frl.2024.106353
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    References listed on IDEAS

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    1. repec:bla:jfinan:v:59:y:2004:i:4:p:1777-1804 is not listed on IDEAS
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    6. Matthias M M Buehlmaier & Toni M Whited, 2018. "Are Financial Constraints Priced? Evidence from Textual Analysis," The Review of Financial Studies, Society for Financial Studies, vol. 31(7), pages 2693-2728.
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    More about this item

    Keywords

    Financial constraints; Emerging markets; KZ index; SA index; Brazil;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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