No Deep Pockets: Some stylized results on firms' financial constraints

This paper is a brief survey of recent empirical work on financial constraints faced by firms. It is organized as a series of stylized results which mirror what is generally understood about severity of financial constraints and effects that they have upon firms. This survey shows that (a) the financial constraint is a widespread key concern for firms, hindering their ability to carry out their optimal investment and growth trajectories and (b) the severity of such constraints depends on institutional and firm specific characteristics, as well as on the nature of investment projects.Firms’ financial constraints; Firm-level studies.

The Shadow of Death: Analysing the Pre-Exit Productivity of Portuguese Manufacturing Firms

In this study, we examine the pre-exiting productivity profile of mature firms relatively to survivors. We also evaluate how productivity affects the probability of exit along various dimensions. Our approach is an empirical one, and it is based on an unbalanced panel of Portuguese manufacturing firms covering a period of one decade. Our findings confirm that market selection forces low-productivity firms to exit, but there is also evidence that a sizeable portion of low-productivity firms do not shut down. Conversely, there is a non-negligible fraction of high-productivity firms that do actually close. In line, too, with some key theoretical predictions, exiting firms reveal a falling productivity level over a number of years prior to exit. Finally, our results from the survival model show that both low-productivity and small firms are much more likely to exit the market. Industry and macro environment were also found to have a non-negligible role on the exit of mature firms.Pre-exit performance; Exit pattern; Productivity; Firm survival; Portugal

Measuring firms’ financial constraints: Evidence for Portugal through different approaches

Today's shortage of financial resources calls for the attention of researchers to the problem of financial constraints faced by firms. In this paper we analyse firms' financial constraints by estimating both investment-cash flow sensitivities and cash-cash flow sensitivities upon a large unbalanced panel of Portuguese firms in order to obtain robust findings. Additionally, we classify firms according to characteristics that are generally believed to indicate the presence of constraints (size, age and dividend payment). Our results clearly show that Portuguese firms are, in general, financially constrained. Furthermore, we verify that such constraints are more severe for certain groups of firms, in particular those firms that are smaller and do not pay dividends. However, we do not find evidence that age as a good proxy for financial constraints. Finally, we cast some doubts on the direct implementation of the SA index as a measure of financial constraints.Financial constraints; Firm-level studies; Portugal.

Does Schumpeterian Creative Destruction Lead to Higher Productivity? The effects of firms’ entry

This paper discusses the impact of newly created firms on industry productivity growth. Our central hypothesis is that there are two potential effects of new firms on productivity growth: a direct effect, as entrants may be relatively more productive than established firms; and an indirect effect, through increased competitive pressure that stimulates incumbents to elevate their productivity in order to survive. The results of the decomposition exercise of aggregate productivity growth suggest that the direct contribution of entry is small. In turn, the regression analysis on the effect of entry on productivity growth of incumbents indicates that the higher is the former, the higher is the latter, which is equivalent to say that the greater is the competitive pressure generated by new entrants, the higher is the expected aggregate productivity level.Entry, Firm dynamics, Productivity growth, Competition effect

Financial constraints: Are there differences between manufacturing and services?

This paper is the first to explicitly explore the differences in firms' financial constraints between and within sectors of economic activity, by estimating the sensitivities of cash holdings to cash-flow upon an unique dataset of Portuguese firms. It shows that, not only there are remarkable differences between sectors and, especially, industries, but most importantly, that the commonly accepted inverse relationships between financial constraints and size and age are not robust to sectorial disaggregation.Services; Financial constraints; Firm-level studies; Portugal.

Financial constraints, exports and monetary integration - Financial constraints and exports: An analysis of Portuguese firms during the European monetary integration

Financial constraints are a key determinant that hinders firms' ability to export. This paper analyses the nexus between these constraints and firms' engagement in international trade, as well as it explores the impact of the European monetary integration process upon firms' financial constraints. Therefore, we estimate cash to cash-flow sensitivities for different periods (1996-2000 and 2001-2004) and different groups of firms, according to their exporting and importing activity. Our results indicate that, depending on their international openness, the European monetary integration seems to have generally helped reducing the degree of financial constraints faced by Portuguese firms. Additionally, our findings suggest that, rather than unconstrained firms self-selecting into exporting, firms' constraints were reduced after they started exporting.Financial constraints; Exports; European financial integration; Firm-level studies; Portugal

Educação para o desenvolvimento: a educação como via para a erradicação da pobreza

A Declaração do Milénio das Nações Unidas, aprovada na Cimeira do Milénio, reflectindo as preocupações de 147 Chefes de Estado e de Governo e de 191 países, que participaram na maior reunião de sempre de dirigentes mundiais, definiu alvos concretos no domínio do desenvolvimento, como reduzir para metade a percentagem de pessoas que vivem na pobreza extrema e fornecer água potável e educação a todos. Na senda de Paulo VI e João Paulo II quando afirmaram que “o Desenvolvimento é o novo nome da Paz” e que “Todos somos responsáveis por todos” propomo-nos realizar uma abordagem dos “Objectivos de Desenvolvimento do Milénio” realçando a relação que consubstancia e inter-relaciona o tríptico Educação, Desenvolvimento e Erradicação da Pobreza, focando-nos na educação enquanto motor de desenvolvimento, cientes dos pressupostos de Gunnar Myrdal relativos ao “ciclo vicioso do subdesenvolvimento” e das indispensáveis estratégias para combater a pobreza, com base na educação e qualificação de recursos humanos

Educação para o desenvolvimento: a educação como via para a erradicação da pobreza

A Declaração do Milénio das Nações Unidas, aprovada na Cimeira do Milénio, reflectindo as preocupações de 147 Chefes de Estado e de Governo e de 191 países, que participaram na maior reunião de sempre de dirigentes mundiais, definiu alvos concretos no domínio do desenvolvimento, como reduzir para metade a percentagem de pessoas que vivem na pobreza extrema e fornecer água potável e educação a todos. Na senda de Paulo VI e João Paulo II quando afirmaram que “o Desenvolvimento é o novo nome da Paz” e que “Todos somos responsáveis por todos” propomo-nos realizar uma abordagem dos “Objectivos de Desenvolvimento do Milénio” realçando a relação que consubstancia e inter-relaciona o tríptico Educação, Desenvolvimento e Erradicação da Pobreza, focando-nos na educação enquanto motor de desenvolvimento, cientes dos pressupostos de Gunnar Myrdal relativos ao “ciclo vicioso do subdesenvolvimento” e das indispensáveis estratégias para combater a pobreza, com base na educação e qualificação de recursos humanos

Estimating the proportion of misstated records in an audit data set using Benford’s law

Auditors are required to provide high levels of assurance that financial statements are free of material misstatements. This paper contributes to the literature on the field of audit sampling, by proposing a procedure to estimate the proportion of misstated records in a numerical audit data set based on stratified sampling, which can also be of assistance in financial fraud detection. Stratification rules based on the expected profile of misstated records and on Benford's law are evaluated and compared through an empirical experiment. The results show that: 1) the examined stratification rules perform significantly better than a simple random sampling approach; 2) when using Benford’s law, combining it with other methods does not seem to improve the performance of the estimation. The proposed procedure can be embedded in an audit software and contribute to enhance the effectiveness of audits and fraud detection.peer-reviewe