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Internal finance and corporate investment: Belgian evidence with panel data

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  • Barran, Fernando
  • Peeters, Marga

Abstract

In this paper the corporate investment decision under financial restrictions is investigated with Belgian firm data from 1984 to 1992. An investment Euler equation is derived from a dynamic optimization model with debt ceilings and an elastic credit supply. The model is estimated by GMM for different firm groups. An important aspect is that the sample is split according to a firm’s association with coordination centers. These centers have become the major external funding source of corporate investment in Belgium since 1986. The estimation results show the dependence of corporate investment on financial factors, both for non-coordination center as well as coordination center firms.

Suggested Citation

  • Barran, Fernando & Peeters, Marga, 1998. "Internal finance and corporate investment: Belgian evidence with panel data," MPRA Paper 28504, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:28504
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    File URL: https://mpra.ub.uni-muenchen.de/28504/1/MPRA_paper_28504.pdf
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    References listed on IDEAS

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    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
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    3. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    4. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 33-60.
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    Citations

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    Cited by:

    1. Chatelain, Jean-Bernard & Teurlai, Jean-Christophe, 2001. "Pitfalls in investment Euler equations," Economic Modelling, Elsevier, vol. 18(2), pages 159-179, April.
    2. Paul Butzen & Catherine Fuss & Philip Vermeulen, 2002. "The impact of uncertainty on investment plans," Working Paper Research 24, National Bank of Belgium.
    3. repec:hal:journl:halshs-00112522 is not listed on IDEAS
    4. Hart, Chad Edward, 1999. "Examining agricultural investment," ISU General Staff Papers 1999010108000013567, Iowa State University, Department of Economics.
    5. Paxil Butzen & Catherine Fuss & Philip Vermeulen, 2002. "The interest rate and crédit channels in Belgium: an investigation with micro-level firm data," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 45(3), pages 5-36.
    6. Jean-Bernard Chatelain, 2003. "Structural Modelling of Financial Constraints on Investment: Where Do We Stand?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00112522, HAL.
    7. Chatelain, Jean-Bernard & Teurlai, Jean-Christophe, 2006. "Euler investment equation, leverage and cash flow misspecification: An empirical analysis on a panel of French manufacturing firms," Journal of Macroeconomics, Elsevier, vol. 28(2), pages 361-374, June.
    8. Marcel Gérard & Frédéric Verscueren, 2002. "Finance, uncertainty and investment: assessing the gains and losses of a generalized non linear structural approach using Belgian panel data," Working Paper Research 26, National Bank of Belgium.
    9. repec:eee:ecmode:v:64:y:2017:i:c:p:20-25 is not listed on IDEAS
    10. Peeters, Marga, 1997. "Does demand and price uncertainty affect Belgian and Spanish corporate investment?," MPRA Paper 23604, University Library of Munich, Germany.
    11. Jean-Christophe Teurlai, 2003. "Investissement corporel et coût du financement externe : identification de différents régimes et rôle du crédit-bail," Économie et Prévision, Programme National Persée, vol. 157(1), pages 51-70.
    12. Jean-Bernard Chatelain, 2002. "Structural modelling of investment and financial constraints: Where do we stand?," Working Paper Research 28, National Bank of Belgium.
    13. Lévi, Loïc & Latruffe, Laure & Ridier, Aude, 2016. "Farm investment and performance in the French (Brittany) dairy sector," 149th Seminar, October 27-28, 2016, Rennes, France 244951, European Association of Agricultural Economists.
    14. Pr. D. Patrick Van Cayseele, 2002. "Investment, R&D and liquidity constraints," Working Paper Research 33, National Bank of Belgium.

    More about this item

    Keywords

    Investment; corporate; financial; financial restrictions; coordination centers; panel; GMM;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G3 - Financial Economics - - Corporate Finance and Governance
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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