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New vs. used capital investment decisions under liquidity constraints

Author Info

Listed author(s):
  • Konstantinos Drakos
  • Eleftherios Goulas
  • Christos Kallandranis

Abstract

Informationally driven capital market imperfections may lead to a systematic relation between expenditure on used capital and the severity of liquidity constraints. We project used capital outlays on internal finance across sectors of different sizes documenting that the sensitivity of used capital investment to cash flow is higher for financially constrained sectors.

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Article provided by Taylor and Francis Journals in its journal Applied Financial Economics Letters.

Volume (Year): 3 (2007)
Issue (Month): 1 (January)
Pages: 15-18

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Handle: RePEc:taf:apfelt:v:3:y:2007:i:1:p:15-18
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  1. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  2. Abel, Andrew B & Blanchard, Olivier J, 1986. "The Present Value of Profits and Cyclical Movements in Investment," Econometrica, Econometric Society, vol. 54(2), pages 249-273, March.
  3. Audretsch, David B. & Elston, Julie Ann, 2002. "Does firm size matter? Evidence on the impact of liquidity constraints on firm investment behavior in Germany," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 1-17, January.
  4. Audretsch, David B. & Elston, Julie Ann, 2002. "Does firm size matter? Evidence on the impact of liquidity constraints on firm investment behavior in Germany," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 1-17, January.
  5. 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.
  6. 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.
  7. Fabio Schiantarelli & Xiaoqiang Hu, 1994. "Investment and Financing Constraints: A Switching Regression Approach Using U.S. Firm Panel Data," Boston College Working Papers in Economics 284., Boston College Department of Economics.
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