Financial constraints on investment: Effects of firm size and the financial crisis

Driver, Ciarán; Muñoz-Bugarin, Jair

doi:10.1016/j.ribaf.2018.09.006

Cited by 35 publications

(23 citation statements)

References 62 publications

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“…The firm size (FS) and leverage (LVG) have positive and significant t ‐statics values as 5.820 and 4.448. The bigger firms invest more in fixed assets because these firms carry their business operation at high volume for which more fixed asset (property, plant and equipment) required (Driver & Bugarin, 2019). Similarly, the leverage strongly influenced the corporate investment.…”

Section: Resultsmentioning

confidence: 99%

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Do the macroeconomic factors influence the firm's investment decisions? A generalized method of moments (GMM) approach

Farooq

Ahmed

Khan³

2020

Int. J Fin Econ

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The study checks association between the macroeconomic factors and corporate investment decision by using 10 years of data (2007–2016) of 12 Asian countries. There exist the series of studies, which discuss the firm‐level determinants of investment but very few studies have found the relationship between macroeconomic factors and corporate investment. So, with specific data set, this study is an attempt to fill this instant gap by exploring the relationship between macroeconomic factors and firm capital investment. GMM approach uses for estimation purposes. The results imply that increases in inflation rate decrease the investment due to increment in future cost of investment. Similarly, high interest rate decreases the corporate capital investment due to opportunistic options of early returns by investing in high interest income securities. The firms from high GDP growth countries carry higher investment level owing to business acceleration. However, the firms from high FDI inflow countries bear the low investment opportunities attributed to suppressed fierce competition. The countries having developed financial sector encourage their firms to invest more in banking securities instead of investing in physical long‐term investment, that is, investment in fixed assets due to professional management of funds by financial institutions and low substantial risks. Briefly, the findings of the study recommend that the corporate managers should focus on economic sensitivity while making decisions about any potential investment.

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Section: Resultsmentioning

confidence: 99%

“…Unlike to macroeconomic conditions, there are some firm‐level factors, which have strong adherence with corporate investment and repeatedly used in many previous studies (Bokpin & Onumah, 2009; Driver & Bugarin, 2019; Gill, 2012; Pacheco, 2017). These factors include firm size, leverage and firm profitability.…”

Section: Introductionmentioning

confidence: 99%

Do the macroeconomic factors influence the firm's investment decisions? A generalized method of moments (GMM) approach

Farooq

Ahmed

Khan³

2020

Int. J Fin Econ

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“…Third, dividend paying stock usually have higher valuation than non-dividend paying stock (Karpavičius & Yu, 2018). And fourth, firm with higher investor based have lower financial constraints (Driver & Muñoz-Bugarin, 2019). Lower financial constraints enable firm to execute more good investment project than firm with higher financial constraints.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

The Relation between Dividend and Financial Constraints to Firm Value

Teja¹,

Wilson²,

Chanry³

et al. 2020

J. financ. account. res.

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This study examines the relation between dividends and financial constraints to firm value using publicly traded firms in Indonesia from 2013 to 2017. The very exploration used a repeated cross section regression method to understand monotonic and non-monotonic alliance between dividends and financial constraints to firm value. The non-monotonic correlation measured by dummy variables for 6 dividends categories, i.e. 0 category is defined as firms that did not pay dividends and category 5 is defined as firms that pay dividends with the highest quintile. It is found that monotonic bond lowers the financial constraints that has more important and consistent positive effects on firm value relative to dividends. These findings imply investors to have higher preferences for a firm’s ability to realize good investment projects and provide higher future profits, relative to current profit in the form of dividends. It also found that non-monotonic connection between dividends and firm value and dividends and financial constraints have relatively equal positive effect to firm value.

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“…Firm with higher sales growth have lower propensity to use non-debt tax shield financing because of their limited amount. Firm size have larger need of financing and more diverse source of financing (Driver & Muñoz-Bugarin, 2019). Firm with larger asset size tend to not attracted to non-debt tax shield financing because of their limited amount.…”

Section: Literature Reviewmentioning

confidence: 99%

Tax Rate and Non-Debt Tax Shield

Teja

2019

JRMB

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Firm can minimize their tax obligation by debt tax shield and non-debt tax shield (NDTS). However, research findings on how firm treat debt tax shield and NDTS, as a substitute or as a complement, remain inconclusive. This paper objective is to provide evidence on how firm usage of NDTSchange when tax rates change in Indonesia. Multivariate regression analysis performed with NDTSas dependent variable and tax rates change and debt level as independent variable. Multivariate regression analysis covering 73 Indonesia firms with 146 observations for the period of year 2008 to year 2010. Within this period, Indonesia corporate tax rate being reduce twice from 30% in 2008 to 28% in 2009 and 25% in 2010. This research find when tax rates is decrease, public firm increase their usage of NDTSwith a lag of one year and debt financing remain increased alongside with non-debt tax shield. This finding provide support to debt tax shield and NDTSas a complement.

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Financial constraints on investment: Effects of firm size and the financial crisis

Cited by 35 publications

References 62 publications

Do the macroeconomic factors influence the firm's investment decisions? A generalized method of moments (GMM) approach

Do the macroeconomic factors influence the firm's investment decisions? A generalized method of moments (GMM) approach

The Relation between Dividend and Financial Constraints to Firm Value

Tax Rate and Non-Debt Tax Shield

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