Financial Constraints and Investment: the Swiss Case

François-Serge Lhabitant and Olivier Tinguely

Swiss Journal of Economics and Statistics (SJES), 2002, vol. 138, issue II, 137-163

Abstract: We study the empirical link that exists between investment-cash flow sensitivities and financial constraints in the Swiss financial market. We follow the standard approach introduced by FAZARRI, HUBBARD and PETERSON (1988), but improve it by using a dynamic classification of firms, a new estimation procedure, while paying particular attention to information asymmetry indicators. We observe that investment-cash flow sensitivities are homogeneous among firms during boom periods, as in KAPLAN and ZINGALES (1995), but heterogeneous during recession periods. The link between investment-cash flow sensitivities and the intensity of financing constraints is monotonically increasing, as in FAZARRI, HUBBARD and PETERSON (1988).

Keywords: financial constraints; investment; Tobin Q (search for similar items in EconPapers)
JEL-codes: G31 G32 (search for similar items in EconPapers)
Date: 2002
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