Identifying Financial Constraints from Production Data
Laurens Cherchye (),
Bram De Rock,
Klaas Mulier and
Marijn Verschelde ()
No 2018-31, Working Papers ECARES from ULB -- Universite Libre de Bruxelles
Farre-Mensa and Ljungqvist (2016, RFS) argue that the existing and widely used measures of financial constraints are inadequate and fail to measure financial constraints. We propose a new methodology to recover firm-year level financial constraints from firms' production behavior. In particular, we measure financial constraints as the profitability that firms forgo when binding constraints on input costs impede them from using the optimal level of inputs and technology. We validate our measure using a unique dataset combining firms' balance sheets from 2005 to 2015 in five Euro Area countries with survey information on firms' self-reported financial constraints, such as actual loan rejections or discouragement. Further, we show that our measure recovers the country-specific trends of financial constraints during the financial crisis and the sovereign debt crisis, and correlates only weakly with the three most popular indices of financial constraints.
Keywords: Firm; behavior (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://dipot.ulb.ac.be/dspace/bitstream/2013/2779 ... ULIER_VERSCHELDE.pdf Œuvre complète ou partie de l'œuvre (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eca:wpaper:2013/277994
Ordering information: This working paper can be ordered from
http://hdl.handle.ne ... lb.ac.be:2013/277994
Access Statistics for this paper
More papers in Working Papers ECARES from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Bibliographic data for series maintained by Benoit Pauwels ().