Our study confirms that the financial constraints to SME’s growth tend to appear as an excess of sensibility of the investment expenditures on firm’s cash flow. Through the application of dynamic panel data techniques to an extended version of Eulero’s investment equation of a sample of...

We use a variant of the Hotelling (1929) model to illustrate that, when a firm faces hard payment constraint(s), financially strong rivals may adopt predatory strategies to drive the firm out of the product market and hence to obtain extra profit from enhanced market power later on. Predation is...

Since the ’80s, economic literature has stressed the importance of external financing on enterprises’ investment decisions; in particular the pecking order theory highlighted the existence of a hierarchy of financing sources, an approach that originates from the existence of asymmetric...

We analyze firms’ investment behavior, differentiating firms according to the cash flow levels they experience during their lifecycles. We consequently consider the firm as the basic unit and not firm-year observations. Firms with persistent positive cash flow show higher investment-cash flow...

Working on a unbalanced sample of OECD countries spanning the period 1970-2003, this paper contributes to the empirical literature on the Feldstein-Horioka puzzle by making three main innovations: First, it goes beyond the traditional national-level investment-saving equations to estimate, for...

This paper investigates the investment behaviour of a large panel of Hungarian firms in the period 1989–99, in order to assess the impact of institutional and regulatory changes on the efficiency of credit allocation. We find that the role of financial factors for investment decisions has...

Recent theoretical contributions assert that income inequality impacts negatively human capital accumulation, and consequently long-run growth. Galor and Zeira (1993) show that such a relationship works primarily through financial constraints, while de la Croix and Doepke (2003) demonstrate that...

It is often raised that enterprises in transition countries are cursed with credit constraints and insufficient capital. Regardless of whether this belief holds for the whole of the economy, the Agency Theory provides a useful both theoretical and empirical framework helping to verify the...

In this paper we examine factors that make some governments revert to procyclical fiscal policies despite the standard normative prescription being to conduct fiscal policy countercyclically. In order to avoid the pitfalls of the two-step methods previous studies have typically used we used a...

In this paper I ask whether a model of ¯rm capital accumulation with entry and exit calibrated to match the investment regularities of U.S. establishments is capable of generating the dependence of ¯rm dynamics on size and age. Firms face uncertainty in the form of idiosyncratic productivity...