Download or read book Corporate Investment with Financial Constraints written by Gayané Hovakimian and published by . This book was released on 2003 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the importance of financial constraints for firm investment expenditures by looking at the relationship between investment expenditures and proceeds from voluntary asset sales in financially healthy US manufacturing companies. Specifically, we examine whether asset sales have a greater influence on investment expenditures for firms that are likely to be financially constrained. Asset sales may provide a cleaner indicator of liquidity than cash flow since it appears not to be positively correlated with future investment opportunities. The cross-sectional differences in firm investment expenditures are examined using an endogenous switching regression model with unknown sample separation, which does not require an a priori classification of firms or knowledge of their financial constraints. We find that after controlling for investment opportunities and cash generated from operations, cash obtained from asset sales is a significant determinant of corporate investment. Moreover, the sensitivity of investment to proceeds from asset sales is significantly stronger for firms that are likely to be associated with characteristics associated with financial constraints

Download or read book Bank based and Market based Financial Systems written by Asl? Demirgüç-Kunt and published by World Bank Publications. This book was released on 1999 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book International Corporate Investment and the Role of Financial Constraints written by W. Sean Cleary and published by . This book was released on 2002 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: International evidence over the 1987-1997 period suggests that the capital expenditures of firms that are financially constrained are much less sensitive to the availability of internal funds than unconstrained firms. The evidence is particularly strong when firms are classified according to financial health, but is also prevalent for groups formed according to dividend behavior and firm size. The results provide strong support for the generality of the results of Kaplan and Zingales (1997) and Cleary (1999). A major reason for the weak investment-cash flow sensitivity displayed by unhealthy firms is that they appear to be busy building up financial slack, which has long-term value, as postulated by Myers and Majluf (1984).

Download or read book Financial Constraints Uses of Funds and Firm Growth and International Comparison written by Vojislav Maksimovi?, Asl? Demirgüç-Kunt and published by World Bank Publications. This book was released on 1999 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: October 1996 The findings suggest that across very different financial systems, financial markets and intermediaries have a comparative advantage in funding short-term investment. An active, though not necessarily large, stock market and high scores on an index of respect for legal norms are associated with faster than predicted rates of firm growth. Government subsidies to industry do not increase the proportion of firms growing faster than predicted. Demirgüç-Kunt and Maksimovic focus on two issues. First, they examine whether firms in different countries finance long-term and short-term investment similarly. Second, they investigate whether differences in financial systems and legal institutions across countries are reflected in the ability of firms to grow faster than they might have by relying on their internal resources or short-term borrowing. Across their sample, they find: * Positive correlations between investment in plant and equipment and retained earnings. * Negative correlations between investment in plant and equipment and external financing. * Negative correlations between investment in short-term assets and retained earnings. * Positive correlations between investment in short-term assets and external financing. These findings suggest that across very different financial systems, financial markets and intermediaries have a comparative advantage in funding short-term investment. For each firm in their sample, they estimate a predicted rate at which it can grow if it does not rely on long-term external financing. They show that the proportion of firms that grow faster than the predicted rate in each country is associated with specific features of the legal system, financial markets, and institutions. An active, though not necessarily large, stock market and high scores on an index of respect for legal norms are associated with faster than predicted rates of firm growth. They present evidence that the law-and-order index measures the ability of creditors and debtors to enter into long-term contracts. Government subsidies to industry do not increase the proportion of firms growing faster than predicted. This paper - a product of the Finance and Private Sector Development Division, Policy Research Department - is part of a larger effort in the department to understand the impact of financial constraints on firm growth.

Download or read book Financial Constraints Asset Tangibility and Corporate Investment written by Heitor Almeida and published by . This book was released on 2008 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: When firms are able to pledge their assets as collateral, investment and borrowing become endogenous: pledgeable assets support more borrowings that in turn allow for further investment in pledgeable assets. We show that this credit multiplier has an important impact on investment when firms face credit constraints: investment-cash flow sensitivities are increasing in the degree of tangibility of constrained firms' assets. If firms are unconstrained, however, investment-cash flow sensitivities are unaffected by asset tangibility. Crucially, asset tangibility itself may determine whether a firm faces credit constraints - firms with more tangible assets may have greater access to external funds. This implies that the relationship between capital spending and cash flows is non-monotonic in the firm's asset tangibility. Our theory allows us to use a differences-in-differences approach to identify the effect of financing frictions on corporate investment: we compare the differential (marginal) effect of asset tangibility on the sensitivity of investment to cash flow across different regimes of financial constraints. We implement this testing strategy on a large sample of manufacturing firms drawn from COMPUSTAT between 1985 and 2000. Our tests allow for the endogeneity of the firm's credit status, with asset tangibility influencing whether a firm is classified as credit constrained or unconstrained in a switching regression framework. The data strongly support our hypothesis about the role of asset tangibility on corporate investment under financial constraints.

Download or read book Research and Development and the Patent Premium written by Gayané Hovakimian and published by . This book was released on 2003 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Financial Constraints Corporate Investment and Future Profitability written by Ronald Espinosa and published by . This book was released on 2015 with total page 113 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides evidence consistent with the idea that the implications of investment on future profitability differ for financially constrained and financially flexible firms. In particular, this study finds that the investment of financially constrained firms is associated with higher persistence in profitability than the investment of flexible firms. This paper also finds that this result is related to differences in future write-downs and goodwill impairments, suggesting that the difference in persistence in profitability between both groups of firms is associated with differences in investment quality. Finally, it shows that investors do not fully understand the role of financial constraints on the relation between investment and future profitability, since the investment of financially constrained firms is associated with higher one-year ahead abnormal returns than the investment of flexible firms. Moreover, for financially constrained firms, large levels of investment are not associated with negative abnormal returns, suggesting that the negative relation between corporate investment and future abnormal stock returns documented in previous research is not general to the entire cross-section of firms.

Download or read book Corporate Investment and Financial Constraints written by Chanatip Pumhiran and published by . This book was released on 2011 with total page 112 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Corporate Investment and the Real Exchange Rate written by Mai Chi Dao and published by International Monetary Fund. This book was released on 2017-08-07 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the relationship between real exchange rate depreciations and indicators of firm performance using data for a sample of more than 30,000 firms from 66 (advanced and emerging market) countries over the 2000-2011 period. We show that depreciations boost profits, investment, and sales of firms that are more financially-constrained and have higher labor shares. These findings are consistent with the view that depreciations boost internal financing opportunities by reducing real wages, thereby spurring investment. We show that these effects on firm performance are enduring, including in the market valuation of firms.

Download or read book The Role of Asset Tangibility on Corporate Investment Under Financial Constraints in Korea written by Jin Woong Kim and published by . This book was released on 2011 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Financial Constraints the User Cost of Capital and Corporate Investment in Australia written by Gianni La Cava and published by . This book was released on 2005 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the factors that drive corporate investment in Australia using a panel of listed companies covering the period from 1990 to 2004. Real sales growth is found to be a significant determinant of corporate investment. The user cost of capital, which incorporates both debt and equity financing costs, also appears to be an important determinant.The paper also explores the effects of cash flow on investment, allowing for the possibility that the availability of internal funding could significantly affect the investment of financially constrained firms. Cash flow is found to affect investment, though the effects appear more complicated than previously reported in empirical research using Australian data. One innovation of this study is that it distinguishes financially distressed firms from financially constrained firms. The presence of financially distressed firms appears to bias downwards the sensitivity of investment to cash flow. Once separate account has been taken of firms experiencing financial distress, and in contrast to theory, cash flow is found to matter for the investment of both financially constrained and unconstrained firms. Interestingly, the estimated degree of sensitivity appears to be roughly the same for both groups.

Download or read book Financing constraints and corporate investment response to Kaplan and Zingales written by Steven M. Fazzari and published by . This book was released on 1996 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Handbook of the Economics of Finance written by G. Constantinides and published by Elsevier. This book was released on 2003-11-04 with total page 698 pages. Available in PDF, EPUB and Kindle. Book excerpt: Arbitrage, State Prices and Portfolio Theory / Philip h. Dybvig and Stephen a. Ross / - Intertemporal Asset Pricing Theory / Darrell Duffle / - Tests of Multifactor Pricing Models, Volatility Bounds and Portfolio Performance / Wayne E. Ferson / - Consumption-Based Asset Pricing / John y Campbell / - The Equity Premium in Retrospect / Rainish Mehra and Edward c. Prescott / - Anomalies and Market Efficiency / William Schwert / - Are Financial Assets Priced Locally or Globally? / G. Andrew Karolyi and Rene M. Stuli / - Microstructure and Asset Pricing / David Easley and Maureen O'hara / - A Survey of Behavioral Finance / Nicholas Barberis and Richard Thaler / - Derivatives / Robert E. Whaley / - Fixed-Income Pricing / Qiang Dai and Kenneth J. Singleton.

Download or read book The Influence of Financial Constraints and Real Options on Corporate Investment Decisions written by Kirill E. Kuzmichev and published by . This book was released on 2013 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents evidence of the negative combined effect of financial constraints and real options on corporate investment. Using panel data on public companies functioning in developed countries, the authors prove that with increasing uncertainty surrounding a firm, the real options effect increases the influence of financial constraints on investment. To this end we have found the threshold value of the option multiple, which switches the uncertainty regimes from relatively high to relatively low, and we have constructed an index of financial constraints.

Download or read book Corporate Investment Debt and Liquidity Choices in the Light of Financial Constraints and Hedging Needs written by Christina E. Bannier and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Investment Acquisitions and Financial Constraints written by Joshua Robert Pierce and published by . This book was released on 2007 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Financial Constraints Uses of Funds and Firm Growth written by Aslı Demirgüç-Kunt and published by . This book was released on 1996 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: