The Dynamics of Externatl Financing

J. Jansson

Working Papers from Uppsala - Working Paper Series

Abstract: A dynamic process underlying firms' discrete financial choices has previously been found, but without controlling for unobserved heterogeneity, this dependence can either be of a "true" nature or an effect of firm-specific characteristics that we cannot observe. This study extends previous research focusing on firms' discrete external financing decision by adapting a model by Honoré and Kyriazidou (2000), which accommodates both fixed effects and a lagged dependent variable, which makes it possible to establish the nature of the dependence. We find that there is a smoothing of financing, even after controlling for unobserved heterogeneity, and also that unobserved heterogeneity plays a significant explanatory role.

Keywords: CORPORATE FINANCE; DISCRETE CHOICE (search for similar items in EconPapers)
JEL-codes: C25 G32 (search for similar items in EconPapers)
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:fth:uppaal:2000:8

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