Financing in an emerging economy: Does financial development or financial structure matter?

Fernanda Castro, Aquiles E.G. Kalatzis and Carlos Martins-Filho

Emerging Markets Review, 2015, vol. 23, issue C, 96-123

Abstract: This paper investigates the effects of the financial system on a firm's investment decisions using data from 404 Brazilian firms over the 1998–2006 period. We also use country-level data and classify firms as financially constrained and unconstrained according to the KZ and WW indexes. The results show that financial development has a significant impact on a firm's investment. Furthermore, the financial structure has an effect on the investment behavior of constrained firms even after controlling for the level of financial development. This finding points to a market-based financial system in order to reduce the constrained firms' dependence on internal resources.

Keywords: Financial constraints; Financial development; Financial structure; Investment decisions (search for similar items in EconPapers)
JEL-codes: G10 G20 G30 G31 O16 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:23:y:2015:i:c:p:96-123

DOI: 10.1016/j.ememar.2015.04.012

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