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Financial systems, financing constraints, and investment: Empirical analysis of OECD countries

[journal article]

Semenov, Radislav

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Abstract This paper investigates the influence of cash flow on corporate investment in eleven OECD countries. We find that the sensitivity of investment levels to internally available funds differs significantly across countries, and is lower in countries with predominantly close bank-firm relationships than in countries with predominantly arm’s-length bank-firm relationships. At the same time, we find no relationship of the levels of financial constraints to indicators of overall financial development. Our results are consistent with the view that information and incentive problems in the capital market have important effects on corporate investment, and that close bank-firm relationships can reduce these problems and thus improve the access of firms to external finance.
Document language English
Publication Year 2006
Page/Pages p. 1963-1974
Journal Applied Economics, 38 (2006) 17
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)