149 research outputs found

    Financial constraints and investment: a critical review of methodological issues and international evidence

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    Investments ; Business enterprises ; Econometric models ; Credit

    Access to Long Term Debt and Effects on Firms' Performance: Lessons from Ecuador

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    This paper documents the maturity structure of firms` debt in Ecuador and discusses how it has been affected by government intervention in credit markets and by financial liberalization. Using firm-level panel data, we then investigate the determinants of access to long-term debt. Finally, we provide evidence on the impact of the maturity structure of debt on firms` performance, in particular on productivity and capital accumulation.

    Form of ownership and financial constraints : panel data evidence from leverage and investment equations

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    The authors analyze whether form of ownership affects the substitutability of internal and external sources of finance. In particular, they test whether financial constraints are more severe for independent firms, and whether members of large national business groups suffer different constraints than subsidiaries of foreign multinational corporations. The results for leverage and investment equations estimated for a panel of Italian companies suggest that: a) independent firms face more severe financial constraints than other firms do; and b) members of national groups and subsidiaries of multinational corporations are not oversensitive to cash flow in their investment decisions. But leverage equations suggest interesting differences between the two groups. In particular, agency costs arising from the conflict between managers and shareholders are more important for subsidiaries of multinational corporations.Economic Theory&Research,Payment Systems&Infrastructure,Microfinance,International Terrorism&Counterterrorism,Banks&Banking Reform,Economic Theory&Research,International Terrorism&Counterterrorism,Banks&Banking Reform,Small Scale Enterprise,Microfinance

    The maturity structure of debt : determinants and effects on firms'performance - evidence from the United Kingdom and Italy

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    The authors empirically investigate the determinants and consequences of the maturity structure of debt, using data from a panel of UK and Italian firms. They find that in choosing a maturity structure for debt, firms'tend to match assets and liabilities. They conclude that more profitable firms'(as measured bythe ratio of cash flow to capital) tend to have more long-term debt. The data do not support the hypothesis that short-term debt, through better monitoring and control, boosts efficiency and growth -rather, the opposite can be concluded. In both countries, the data suggest a positive relationship between initial debt maturity and the firms'subsequent medium-term performance (i.e., profitability and growth in real sales). In both countries total factor productivity (TFP) depends positively on the length of debt maturity when the maturity variable is entered both contemporaneously and lagged. But in Italy the positive effect of the length of maturity on productivity is substantially reduced or even reversed when the proportion of subsidized credit increases. The authors: document the relationship between firms'characteristics and their choice of shorter or long-term debt by estimating a maturity equation and interpreting the results in light of insights from theoretical literature, and by analyzing the effects of maturity on firms'later performance in terms of profitability, growth, and productivity; assess how TFP depends on the degree of leverage and the proportion of longer and shorter-term debt; and analyze the relationship between firms'debt maturity and investment.Municipal Financial Management,Financial Intermediation,Payment Systems&Infrastructure,Economic Theory&Research,Banks&Banking Reform,Economic Theory&Research,Municipal Financial Management,Banks&Banking Reform,Environmental Economics&Policies,Financial Intermediation

    Access to long term debt and effects of firm's performance : lessons from Ecudaor

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    Recent theory increasingly emphasizes the association of short-term debt with higher-quality firms and better incentives. The possibility of premature liquidation, for example, may serve as a disciplinary device to improve firm performance. At the same time the role of long-term debt, especially when it is heavily subsidized, is being rethought because so many development banks are plagued with nonperforming loans and doubts about the selection criteria used in allocating funds. The authors explore empirical evidence about the structure of debt maturity in Ecuadorian firms. They discuss how it has been affected by government intervention in credit markets, and by financial liberalization. Using firm panel data, they investigate the determinants of access to long-term debt in Ecuador. Finally, they provide evidence about how the maturity structure of debt affects firms'performance, particularly productivity and capital accumulation. They find that: a) long-term debt is very unevenly distributed; b) large firms are more likely to have access to long term debt than small firms and are on average more profitable; c) conditional on size, operating profits do not increase probability of receiving long-term credit and may actually decrease it, suggesting that the mechanism used to allocate long-term resources in Ecuador may be flawed; d) the allocation problem was worse for directed credit, though there is evidence this problem was less severe after financial liberalization; e) there is a strong positive association between asset maturity and debt maturity, a matching of assets and liabilities; f) shorter-term loans are not conducive to greater productivity, while long-term loans may lead to improvements in productivity; and g) while long-term loans may positively affect the quality of capital accumulation, they do not have an impact on the amount of fixed investment.Economic Theory&Research,Payment Systems&Infrastructure,Environmental Economics&Policies,Banks&Banking Reform,Strategic Debt Management,Economic Theory&Research,Environmental Economics&Policies,Banks&Banking Reform,Strategic Debt Management,Financial Intermediation

    Capital Accumulation and Growth: A New Look at the Empirical Evidence

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    We present evidence that an increase in investment as a share of GDP predicts a higher growth rate of output per worker, not only temporarily, but also in the steady state. These results are found using pooled annual data for a large panel of countries, using pooled data for non- overlapping five-year periods, or allowing for heterogeneity across countries in regression coefficient. They are robust to model specifications and estimation methods. The evidence that investment has a long-run effect on growth rates is consistent with the main implication of certain endogenous growth models, such as the AK model.Growth, Capital Accumulation, InvestmentS

    Culture, Policies and Labor Market Outcomes

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    We study whether cultural attitudes towards gender, the young, and leisure are significant determinants of the evolution over time of the employment rates of women and of the young, and of hours worked in OECD countries. Beyond controlling for a larger menu of policies, institutions and structural characteristics of the economy than has been done so far, our analysis improves upon existing studies of the role of "culture" for labor market outcomes by dealing explicitly with the endogeneity of attitudes, policies and institutions, and by allowing for the persistent nature of labor market outcomes. When we do all this we find that culture still matters for women employment rates and for hours worked. However, policies and other institutional or structural characteristics are also important. Attitudes towards youth independence, however, do not appear to be important in explaining the employment rate of the young. In the case of women employment rates, the policy variable that is significant along with attitudes, is the OECD index of employment protection legislation. For hours worked the policy variables that play a role, along with attitudes, are the tax wedge and unemployment benefits. The quantitative impact of these policy variables is such that changes in policies have at least the potential to undo the effect of variations in cultural traits on labor market outcomes.culture, policies, institutions, employment, hours

    Does Financial Liberalization Improve the Allocation of Investment?: Micro Evidence from Developing Countries

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    Has financial liberalization improved the efficiency with which investment funds are allocated to competing uses? In this paper, we address this question using firm-level panel data from 12 developing countries. We develop a summary index of the efficiency of investment allocation that measures whether, and to what extent, investment funds are going to firms with a higher marginal return to capital. We then examine the relationship between this index and various measures of financial liberalization. The results suggest that in the majority of cases financial reform has led to an increase in the efficiency with which investment funds are allocated.
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