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Internal finance and corporate investment: Belgian evidence with panel data

Fernando Barran and Marga Peeters ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper the corporate investment decision under financial restrictions is investigated with Belgian firm data from 1984 to 1992. An investment Euler equation is derived from a dynamic optimization model with debt ceilings and an elastic credit supply. The model is estimated by GMM for different firm groups. An important aspect is that the sample is split according to a firm’s association with coordination centers. These centers have become the major external funding source of corporate investment in Belgium since 1986. The estimation results show the dependence of corporate investment on financial factors, both for non-coordination center as well as coordination center firms.

Keywords: Investment; corporate; financial; financial restrictions; coordination centers; panel; GMM (search for similar items in EconPapers)
JEL-codes: C23 G32 G3 D92 (search for similar items in EconPapers)
Date: 1998
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