Financial Conditions and Investment during the Transition: Evidence from Czech Firms
In this paper, we examine net investment during the early stages of transition using micro data on the population of medium and large industrial firms in the Czech Republic during the 1992-95 period. We examine the relevance of alternative models of investment and test if investment behavior varies across categories of ownership and with the legal status of firms. Our analysis of depreciation leads us to the conclusion that replacement investment displays a similar pattern in many ownership-legal form categories of firms. Retained profit is found to be a major determinant of new investment and the estimate is statistically significant even when we use the most robust fixed effects estimates based on one-year differences. We find that enterprise profitability has a strong positive effect on investment in all types of firms except for privately owned-limited liability companies and foreign owned and mixed ownership firms. These results are consistent with the financing-hierarchy and credit-rationing hypotheses which indicate that domestic firms cannot easily borrow investment funds externally and that net investment varies with retained profits. Firms take into account various stock measures of internal finance. In particular, a stock of cash, receivables, receivables overdue, payables, and payables overdue systematically affect net investment.
|Date of creation:||Mar 2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (+420) 224 005 123
Fax: (+420) 224 005 333
Web page: http://www.cerge-ei.cz
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Terrell, Katherine, 1992. "Productivity of western and domestic capital in polish industry," Journal of Comparative Economics, Elsevier, vol. 16(3), pages 494-514, September.
- Thornton, Judith, 1970. "Value-Added and Factor Productivity in Soviet Industry," American Economic Review, American Economic Association, vol. 60(5), pages 863-71, December.
- Abel, Andrew B & Blanchard, Olivier J, 1986.
"The Present Value of Profits and Cyclical Movements in Investment,"
Econometric Society, vol. 54(2), pages 249-73, March.
- Andrew B. Abel & Olivier J. Blanchard, 1983. "The Present Value of Profits and Cyclical Movements in Investment," NBER Working Papers 1122, National Bureau of Economic Research, Inc.
- repec:fth:harver:1491 is not listed on IDEAS
- Matthew D. Shapiro, 1986.
"The Dynamic Demand for Capital and Labor,"
NBER Working Papers
1899, National Bureau of Economic Research, Inc.
- Blanchard, Olivier & Rhee, Changyong & Summers, Lawrence, 1993.
"The Stock Market, Profit, and Investment,"
The Quarterly Journal of Economics,
MIT Press, vol. 108(1), pages 115-36, February.
- Blanchard, O. & Rhee, C. & Summers, L., 1990. "The Stock Market, Profit And Investment," RCER Working Papers 233, University of Rochester - Center for Economic Research (RCER).
- Olivier Blanchard & Changyong Rhee & Lawrence Summers, 1990. "The Stock Market, Profit and Investment," NBER Working Papers 3370, National Bureau of Economic Research, Inc.
- Fumio Hayashi & Tohru Inoue, 1990.
"The Relation Between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms,"
NBER Working Papers
3326, National Bureau of Economic Research, Inc.
- Hayashi, Fumio & Inoue, Tohru, 1991. "The Relation between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms," Econometrica, Econometric Society, vol. 59(3), pages 731-53, May.
- Bond, Stephen & Meghir, Costas, 1994.
"Dynamic Investment Models and the Firm's Financial Policy,"
Review of Economic Studies,
Wiley Blackwell, vol. 61(2), pages 197-222, April.
- Stephen Bond & Costas Meghir, 1990. "Dynamic Investment Models and the Firm's Financial Policy," CEPR Financial Markets Paper 0013, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
- 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.
- Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987.
"Financing Constraints and Corporate Investment,"
NBER Working Papers
2387, National Bureau of Economic Research, Inc.
- Lizal, Lubomir & Svejnar, Jan, 1998.
"Enterprise Investment During the Transition: Evidence from Czech Panel Data,"
CEPR Discussion Papers
1835, C.E.P.R. Discussion Papers.
- Lubomir Lizal & Jan Svejnar, 1997. "Enterprise Investment During the Transition: Evidence from Czech Panel Data," William Davidson Institute Working Papers Series 60, William Davidson Institute at the University of Michigan.
- Desai, Padma, 1976. "The Production Function and Technical Change in Postwar Soviet Industry: A Reexamination," American Economic Review, American Economic Association, vol. 66(3), pages 372-81, June.
- Jorgenson, Dale W, 1971. "Econometric Studies of Investment Behavior: A Survey," Journal of Economic Literature, American Economic Association, vol. 9(4), pages 1111-47, December.
- Lubomir Lizal, 2001.
"Depreciation Rates in a Transition Economy: Evidence from Czech Panel Data,"
- Lubomír Lízal, 1999. "Depreciation rates in a transition economy: evidence from czech panel data," Prague Economic Papers, University of Economics, Prague, vol. 1999(3).
- Whited, Toni M, 1992.
" Debt, Liquidity Constraints, and Corporate Investment: Evidence from Panel Data,"
Journal of Finance,
American Finance Association, vol. 47(4), pages 1425-60, September.
- Toni M. Whited, 1990. "Debt, liquidity constraints, and corporate investment: evidence from panel data," Finance and Economics Discussion Series 114, Board of Governors of the Federal Reserve System (U.S.).
- Oliner, Stephen D & Rudebusch, Glenn D, 1992. "Sources of the Financing Hierarchy for Business Investment," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 643-54, November.
- Weitzman, Martin L., 1979. "Technology transfer to the USSR: An econometric analysis," Journal of Comparative Economics, Elsevier, vol. 3(2), pages 167-177, June.
- Nickell, Stephen J, 1977. "Uncertainty and Lags in the Investment Decisions of Firms," Review of Economic Studies, Wiley Blackwell, vol. 44(2), pages 249-63, June.
- Terrell, Katherine, 1993. "Technical Change and Factor Bias in Polish Industry (1962-1983)," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 741-47, November.
- Abel, Andrew B., 1980. "Empirical investment equations : An integrative framework," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 12(1), pages 39-91, January.
When requesting a correction, please mention this item's handle: RePEc:cer:papers:wp153. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jana Koudelkova)
If references are entirely missing, you can add them using this form.