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Investment and Financing Constraints: A Switching Regression Approach Using U.S. Firm Panel Data

Author

Listed:
  • Fabio Schiantarelli

    (Boston College)

  • Xiaoqiang Hu

    (Claremont McKenna College)

Abstract

In this paper we develop a switching regression model of investment, in which the probability of a firm being financially constrained is endogenously determined. This approach allows one to address the potential problem of static and dynamic misclassification encountered where firms are sorted using a criteria chosen a priori. The empirical results obtained for US panel data suggest that the probability of being constrained depends upon variables that capture each firm's credit worthiness, and it is also related to general macroeconomic conditions and to the tightness of monetary policy.

Suggested Citation

  • 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.
    • Handle: RePEc:boc:bocoec:284
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    File URL: http://fmwww.bc.edu/EC-P/wp284.pdf
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    Cited by:

    1. Demoussis, Michael & Drakos, Konstantinos & Giannakopoulos, Nicholas, 2016. "The Impact of Sovereign Ratings on Eurozone SMEs Credit Rationing," MPRA Paper 76364, University Library of Munich, Germany.
    2. Konstantinos Drakos, 2013. "Bank loan terms and conditions for Eurozone SMEs," Small Business Economics, Springer, vol. 41(3), pages 717-732, October.
    3. Natalia Isachenkova & Tomasz Marek Mickiewicz, 2003. "Ownership Characteristics and Access to Finance: Evidence from a Survey of Large Privatised Companies in Hungary and Poland," UCL SSEES Economics and Business working paper series 35, UCL School of Slavonic and East European Studies (SSEES).
    4. Drakos, Konstantinos & Giannakopoulos, Nicholas, 2011. "On the determinants of credit rationing: Firm-level evidence from transition countries," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1773-1790.
    5. Kallandranis, Christos & Drakos, Konstantinos, 2021. "Self-Rationing in European Businesses: Evidence from Survey Analysis," Finance Research Letters, Elsevier, vol. 41(C).
    6. Kalatzis, Aquiles Elie Guimarães & Azzoni, Carlos Roberto, 2009. "Investment decisions in troubled times: A Bayesian approach applied to Brazilian firms," International Journal of Production Economics, Elsevier, vol. 120(2), pages 595-606, August.
    7. Tomasz Mickiewicz & Kate Bishop & Urmas Varblane, 2004. "Financial Constraints in Investment - Foreign Versus Domestic Firms. Panel Data Results From Estonia, 1995-1999," William Davidson Institute Working Papers Series 2004-648, William Davidson Institute at the University of Michigan.
    8. Bascuñán, Mauricio & Garcia, René & Poitevin, Michel, 1995. "Information asymétrique, contraintes de liquidité et investissement," L'Actualité Economique, Société Canadienne de Science Economique, vol. 71(4), pages 398-420, décembre.
    9. Michael Demoussis & Konstantinos Drakos & Nicholas Giannakopoulos, 2017. "The impact of sovereign ratings on euro zone SMEs’ credit rationing," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 44(5), pages 745-764, October.

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