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Financing Constraint and Firm-Level Investment Following a Financial Crisis in Indonesia


  • Agustinus Prasetyantoko

    () (GATE CNRS)


This paper deals with the sensitivity relation between firm investment and internal liquidity by splitting samples into two different groups of firm, namely the tradable (T) and non-tradable (N) sectors. This paper finds that during boom periods, there is no significant financial constraint on the T and N sectors. In post-crisis periods, it seems that both sectors also have no significant important problem in their internal finance. Both sectors basically move comparably. The main finding is relatively different with several theoretical predictions, especially Tornell and Westermann (2002a, 2004), in which the T-sector would be predicted as experiencing less financial constraint in burst period. However, we find that debt is important variable for sustaining investment in Indonesia. By employing panel data analysis, the findings of this study can shed light on the financing behavior of listed companies in Indonesia, as well as on their investment behavior in the midst of financing constraints and credit market imperfections. The study’s sample contains 147 companies listed on the Jakarta Stock exchange for at least 5 five consecutive years between 1994 – 2004.

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  • Agustinus Prasetyantoko, 2007. "Financing Constraint and Firm-Level Investment Following a Financial Crisis in Indonesia," Working Papers 0714, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
  • Handle: RePEc:gat:wpaper:0714

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    Cited by:

    1. Connelly, J. Thomas, 2016. "Investment policy at family firms: Evidence from Thailand," Journal of Economics and Business, Elsevier, vol. 83(C), pages 91-122.

    More about this item


    asymmetric financing opportunities; financial crisis; financing constraint; firm investment;

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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