Investment and financing constraints in China: Does working capital management make a difference?

Sai Ding, Alessandra Guariglia and John Knight

Journal of Banking & Finance, 2013, vol. 37, issue 5, 1490-1507

Abstract: We use a panel of over 116,000 Chinese firms of different ownership types over the period 2000–2007 to analyze the linkages between investment in fixed and working capital and financing constraints. We find that those firms characterized by high working capital display high sensitivities of investment in working capital to cash flow (WKS) and low sensitivities of investment in fixed capital to cash flow (FKS). We then construct and analyze firm-level FKS and WKS measures and find that, despite severe external financing constraints, those firms with low FKS and high WKS exhibit the highest fixed investment rates. This suggests that an active management of working capital may help firms to alleviate the effects of financing constraints on fixed investment.

Keywords: Investment; Cash flow; Financing constraints; Working capital management; China (search for similar items in EconPapers)
JEL-codes: D92 E22 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (134)

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Related works:
Working Paper: Investment and financing constraints in China: does working capital management make a difference? (2011)
Working Paper: Investment and financing constraints in China: does working capital management make a difference? (2010)
Working Paper: Investment and financing constraints in China: does working capital management make a difference? (2010)
Working Paper: Investment and financing constraints in China: does working capital management make a difference? (2010)
Working Paper: Investment and financing constraints in China: does working capital management make a difference? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:5:p:1490-1507

DOI: 10.1016/j.jbankfin.2012.03.025

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