Financial factors and investment in Belgium, France, German and the UK: A comparison using company panel data
This paper investigates whether the impact of financing constraints on company investment spending differs between firms in Belgium, France, Germany and the UK. Many previous studies have found that investment spending displays "excess sensitivity to cash flow" for individual countries, and concluded that this evidence is consistent with the presence of financing constraints. Very few previous studies have presented comparative evidence. Interest in a comparative study stems from the considerable differences between financial systems in these four countries: for example, in sources of investment finance, company ownership structures, the market for corporate control, and the relative importance of different financial markets and institutions. Differences between the UK "market-based" system and the German "bank-based" system have received particular attention. It is sometimes suggested that the arms-length relation between firms and suppliers of finance that tends to characterise the market-oriented system may be less effective at dealing with problems of asymmetric information and monitoring. If so, it is possible that financing constraints on investment would be more severe in the UK than in the continental European countries. We construct company panel datasets for manufacturing firms in Belgium, France, Germany and the UK, covering the period 1978-89. These datasets are used to estimate a range of empirical investment equations, and to investigate the role played by financial factors in each country. A robust finding is that cash flow or profits terms do appear to be both statistically and quantitatively more significant in the UK than in the other three countries. This evidence is consistent with the suggestion that financial constraints on company investment spending may be relatively severe in the more market-oriented UK financial system.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Aug 1997|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (+44) 020 7291 4800
Fax: (+44) 020 7323 4780
Web page: http://www.ifs.org.uk
More information through EDIRC
|Order Information:|| Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE|
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.:
- 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.).
- 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.
- Mayer, Colin, 1987.
"New Issues in Corporate Finance,"
CEPR Discussion Papers
181, C.E.P.R. Discussion Papers.
- Colin Mayer, 1990. "Financial Systems, Corporate Finance, and Economic Development," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 307-332 National Bureau of Economic Research, Inc.
- Nickell, Stephen, 1985. "Error Correction, Partial Adjustment and All That: An Expository Note," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 47(2), pages 119-29, May.
- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
When requesting a correction, please mention this item's handle: RePEc:ifs:ifsewp:97/08. 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: (Stephanie Seavers)
If references are entirely missing, you can add them using this form.