Does the Investment Opportunities Bias Affect the Investment-Cash Flow Sensitivities of Unlisted SMEs?

Bert D’Espallier and Alessandra Guariglia

Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: Using a panel of 5,999 small and medium-sized Belgian enterprises (SMEs) over the period 2002-2008, we identify three measures of investment opportunities suitable for unlisted firms. We then estimate firm-varying investment-cash flow sensitivities (ICFS) from reduced-form investment equations that include these measures, and compare them with those derived from a model that does not control for investment opportunities. We find that all our models yield similar ICFS estimates, which are significantly related to a wide set of proxies for financing constraints. These findings suggest that the ICFS of SMEs do not simply reflect investment opportunities. The investment opportunities bias may therefore have been overstated in previous literature.

Keywords: Financing constraints; Firm-varying investment-cash flow sensitivities; Investment opportunities; Gross added value. (search for similar items in EconPapers)
Date: 2009-12
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.nottingham.ac.uk/cfcm/documents/papers/09-12.pdf (application/pdf)

Related works:
Journal Article: Does the investment opportunities bias affect the investment-cash flow sensitivities of unlisted SMEs? (2015)
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:not:notcfc:09/12

Access Statistics for this paper

More papers in Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM) School of Economics University of Nottingham University Park Nottingham NG7 2RD. Contact information at EDIRC.
Bibliographic data for series maintained by Hilary Hughes ().