Financing constraints and small firm investment behaviour

Besnik Krasniqi () and Isa Mustafa

International Journal of Entrepreneurship and Innovation Management, 2011, vol. 14, issue 2/3, 151-175

Abstract: The aim of the paper is to investigate the impact of financial constraints on investment behaviour of firms in Kosovo. This article uses data from the 2005 survey of small and medium-sized enterprises (SMEs) conducted by Riinvest Institute in order to test the investment-cash flow sensitivity hypothesis. For this purpose we use two regression techniques. First, we use ordinary least square (OLS) regression to estimate an investment equation model in order to test sensitivity of investment to cash flow. Then, we estimate a switching regression model as a robustness check in order to control for possible methodological biases of other studies. Econometric results do not support investment-cash flow sensitivity hypothesis after controlling for different sub samples of firms (i.e., firms that received a credit, firms that did not ask for credit and firms that were refused by banks) and methods.

Keywords: investment behaviour; OLS; ordinary least squares; linear regression; switching regression; financial barriers; business growth; small and medium-sized enterprises; SMEs; financing constraints; small firms; Kosovo; Riinvest Institute; surveys; investment sensitivity; cash flow sensitivity; equation models; robustness; methodological biases; econometric results; credit; banks; transition economies; entrepreneurship; innovation management; entrepreneurial finance. (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.inderscience.com/link.php?id=41729 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:ijeima:v:14:y:2011:i:2/3:p:151-175

Access Statistics for this article

More articles in International Journal of Entrepreneurship and Innovation Management from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().