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Financial systems, financing constraints and investment: empirical analysis of OECD countries

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  • Radislav Semenov

Abstract

This paper investigates the influence of cash flow on corporate investment in 11 OECD countries. We find that the sensitivity of investment levels to internally available funds differs significantly across countries, and is lower in countries with predominantly close bank-firm relationships than in countries with predominantly arm's-length bank-firm relationships. At the same time, we find no relationship of the levels of financial constraints to indicators of overall financial development. Our results are consistent with the view that information and incentive problems in the capital market have important effects on corporate investment, and that close bank-firm relationships can reduce these problems and thus improve the access of firms to external finance.

Suggested Citation

  • Radislav Semenov, 2006. "Financial systems, financing constraints and investment: empirical analysis of OECD countries," Applied Economics, Taylor & Francis Journals, vol. 38(17), pages 1963-1974.
  • Handle: RePEc:taf:applec:v:38:y:2006:i:17:p:1963-1974
    DOI: 10.1080/00036840500427122
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    References listed on IDEAS

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    1. Chew, Donald, 1997. "Studies in International Corporate Finance and Governance Systems: A Comparison of the US, Japan, and Europe," OUP Catalogue, Oxford University Press, number 9780195107951.
    2. BenoƮt Mulkay & Bronwyn H, Hall & Jacques Mairesse, 2000. "Firm Level Investment and R&D in France and the United States : A Comparison," Working Papers 2000-49, Center for Research in Economics and Statistics.
    3. Quack, Sigrid & Hildebrandt, Swen, 1995. "Hausbank or Fournisseur? Bank services for small and medium sized enterprises in Germany and France," Discussion Papers, Research Unit: Organization and Employment FS I 95-102, Social Science Research Center Berlin (WZB).
    4. Soskice, David, 1996. "German technology policy, innovation, and national institutional frameworks," Discussion Papers, Research Unit: Economic Change and Employment FS I 96-319, Social Science Research Center Berlin (WZB).
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    Cited by:

    1. Mohammad Joarder & Monir Ahmed & Tahsina Haque & Syed Hasanuzzaman, 2014. "An empirical testing of informational efficiency in Bangladesh capital market," Economic Change and Restructuring, Springer, vol. 47(1), pages 63-87, February.
    2. Massimo Molinari & Silvia Giannangeli & Giorgio Fagiolo, 2016. "Financial Structure and Corporate Growth: Evidence from Italian Panel Data," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 45(3), pages 303-325, November.
    3. Martinsson, Gustav, 2009. "Are there Financial Constraints for Firms Investing in Skilled Employees?," Working Paper Series in Economics and Institutions of Innovation 169, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.

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