Investment and Determinants of Financial Constraints When Sample Splitting Criteria Are Unknown and Endogenous

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Investment and Determinants of Financial Constraints When Sample Splitting Criteria Are Unknown and Endogenous

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dc.contributor.author Hobdari, Bersant en_US
dc.contributor.author Jones, Derek C. en_US
dc.contributor.author Mygind, Niels en_US
dc.date.accessioned 2009-02-04T10:24:07Z
dc.date.available 2009-02-04T10:24:07Z
dc.date.issued 2007-12-04T00:00:00Z en_US
dc.identifier.uri http://hdl.handle.net/10398/6626
dc.description.abstract Unlike previous empirical work in analyzing investment behavior and the determinants of liquidity constraints, we use a switching regression framework when sample separation is unknown and endogenous and firms are assumed to operate either in the financially constrained or in the financially unconstrained regime. The actual regime the firm is in is determined by a switching or selection function, which depends on those variables that theoretically determine the wedge between internal and external finance, the severity of information and agency problems and time-varying firm characteristics. By using new panel data for Estonian companies during 1993 through 1999 we find that: (i) separate regimes exist in investment behavior; (ii) the likelihood of being financially constrained is higher in firms that are recently privatized, small and where ownership is concentrated in the hands of insiders and the state; (iii) soft budget constraints lower the probability of a firm being financially constrained; (iv) the actual probabilities of operating in the financially constrained regime are calculated to be quite high and essentially stable during 1993-1999: 0.52-0.57 for state owned firms, 0.40-0.46 for domestic owned firms and 0.53-0.57 for employee owned firms; (v) ownership structure affects investment beyond its indirect effects through financial constraints. Corporate Investment, Liquidity Constraints, Insider Ownership, Switching Regression, Soft Budget Constraint. en_US
dc.format.extent 48 s. en_US
dc.language eng en_US
dc.relation.ispartofseries Working paper;2007-4 en_US
dc.title Investment and Determinants of Financial Constraints When Sample Splitting Criteria Are Unknown and Endogenous en_US
dc.type wp en_US
dc.accessionstatus modt07dec04 nijemo en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Institut for International Økonomi og Virksomhedsledelse en_US
dc.contributor.departmentshort INT en_US
dc.contributor.departmentuk Department of International Economics and Management en_US
dc.contributor.departmentukshort IEM en_US
dc.idnumber x656555407 en_US
dc.publisher.city København en_US
dc.publisher.year 2007 en_US


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