IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Where Are the Fragilities? The Relationship Between Firms' Financial Constraints, Size, and Age

  • Carlos Carreira


    (GEMF and Faculty of Economics, University of Coimbra)

  • Filipe Silva

    (GEMF and Faculty of Economics, University of Coimbra)

Recessions and financial crisis increase financial constraints and disproportionally affect constrained firms. This paper investigates the differences in firms’ financial constraints between sectors using a cash to cash-flow rationale (Almeida et al., 2004) and a firm specific index of constraints (Hovakimien and Hovakimien, 2009). Interpreting higher sensitivities of cash to cash flow as evidence of higher constraints, we find that the relationships between firm size, firm age and constraints are, in general, non-monotonic and not robust to economic sector disaggregation, which contrasts with previous findings.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2012-12.

in new window

Length: 24 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:gmf:wpaper:2012-12
Contact details of provider: Postal: Av. Dias da Silva, 165, 3004-512 COIMBRA
Phone: + 351 239 790 500
Fax: +351 239 403511
Web page:

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
  2. Acharya, Viral V & Almeida, Heitor & Campello, Murillo, 2005. "Is Cash Negative Debt? A Hedging Perspective on Corporate Financial Policies," CEPR Discussion Papers 4886, C.E.P.R. Discussion Papers.
  3. Carlos Carreira & Filipe Silva, 2010. "No Deep Pockets: Some Stylized Empirical Results On Firms' Financial Constraints," Journal of Economic Surveys, Wiley Blackwell, vol. 24(4), pages 731-753, 09.
  4. Pál, Rozália & Ferrando, Annalisa, 2006. "Financing constraints and firms’ cash policy in the euro area," Working Paper Series 0642, European Central Bank.
  5. Charles J. Hadlock & Joshua R. Pierce, 2010. "New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index," Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 1909-1940.
  6. Murillo Campello & Erasmo Giambona & John R. Graham & Campbell R. Harvey, 2010. "Liquidity Management and Corporate Investment During a Financial Crisis," NBER Working Papers 16309, National Bureau of Economic Research, Inc.
  7. Filipe Silva & Carlos Carreira, 2012. "Do financial constraints threat the innovation process? Evidence from Portuguese firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(8), pages 701-736, November.
  8. Filipe Silva & Carlos Carreira, 2010. "Financial constraints: Are there differences between manufacturing and services?," GEMF Working Papers 2010-16, GEMF - Faculdade de Economia, Universidade de Coimbra.
  9. Michael T. Hannan, 2005. "Ecologies of Organizations: Diversity and Identity," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 51-70, Winter.
  10. Kannan, Prakash, 2012. "Credit conditions and recoveries from financial crises," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 930-947.
  11. Alex Coad, 2009. "Investigating the exponential age distribution of firms," Papers on Economics and Evolution 2009-23, Philipps University Marburg, Department of Geography.
  12. Almeida, Heitor & Campello, Murillo & Weisbach, Michael S., 2011. "Corporate financial and investment policies when future financing is not frictionless," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 675-693, June.
  13. Ang, James & Smedema, Adam, 2011. "Financial flexibility: Do firms prepare for recession?," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 774-787, June.
  14. Patrick Musso & Stefano Schiavo, 2007. "The Impact of Financial Constraints on Firms Survival and Growth," Sciences Po publications 2007-37, Sciences Po.
  15. Filipe Silva & Carlos Carreira, 2011. "Financial constraints, exports and monetary integration - Financial constraints and exports: An analysis of Portuguese firms during the European monetary integration," GEE Papers 0039, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Jul 2011.
  16. Arslan, Ozgur & Florackis, Chrisostomos & Ozkan, Aydin, 2006. "The role of cash holdings in reducing investment-cash flow sensitivity: Evidence from a financial crisis period in an emerging market," Emerging Markets Review, Elsevier, vol. 7(4), pages 320-338, December.
  17. 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.
  18. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  19. Owen Lamont & Christopher Polk & Jesus Saa-Requejo, . "Financial Constraints and Stock Returns."," CRSP working papers 451, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  20. repec:sen:rebelj:v:liv:y:2009:i:4:p:461-489 is not listed on IDEAS
  21. Yi-Chen Lin, 2007. "The cash flow sensitivity of cash: evidence from Taiwan," Applied Financial Economics, Taylor & Francis Journals, vol. 17(12), pages 1013-1024.
  22. Blalock, Garrick & Gertler, Paul J. & Levine, David I., 2008. "Financial constraints on investment in an emerging market crisis," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 568-591, April.
  23. Sean Cleary, 1999. "The Relationship between Firm Investment and Financial Status," Journal of Finance, American Finance Association, vol. 54(2), pages 673-692, 04.
  24. Flora Bellone & Patrick Musso & Lionel Nesta & Michel Quere, 2010. "Market Selection Along the Firm Life Cycle," Chapters, in: Innovation, Economic Growth and the Firm, chapter 5 Edward Elgar.
  25. Heitor Almeida & Murillo Campello & Michael S. Weisbach, 2004. "The Cash Flow Sensitivity of Cash," Journal of Finance, American Finance Association, vol. 59(4), pages 1777-1804, 08.
  26. Toni M. Whited & Guojun Wu, 2006. "Financial Constraints Risk," Review of Financial Studies, Society for Financial Studies, vol. 19(2), pages 531-559.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:gmf:wpaper:2012-12. 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: (Sara Santos)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.