Corporate Investments in Asian Markets: Financial Conditions, Financial Development, and Financial Constraints

Maria Socorro Gochoco-Bautista, Noli Sotocinal and Jianxin Wang

World Development, 2014, vol. 57, issue C, 63-78

Abstract: This paper explores the mechanisms through which finance affects corporate investments and capital accumulation. We separate the effects of financial conditions from those of financial development. Based on a sample of firms from five Asian emerging economies, we find that (i) financial conditions affect firms’ growth opportunities and investment demand, while financial development primarily affects firms’ external financing constraints; (ii) large firms benefit more from improved financial conditions, while small firms benefit more from financial development; and (iii) these effects are asymmetric—in general, stronger when the global financial crisis was unfolding and weaker during the subsequent rebound.

Keywords: corporate investments; Asia; financial conditions index; financial development; financial constraints; investment sensitivity to cash flow (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (18)

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Working Paper: Corporate Investments in Asian Emerging Markets: Financial Conditions, Financial Development, and Financial Constraints (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:57:y:2014:i:c:p:63-78

DOI: 10.1016/j.worlddev.2013.11.017

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