Corporate Capital Structure and How Soft Budget Constraints May Affect it

Rizov, Marian

doi:10.2139/ssrn.987462

Cited by 2 publications

(3 citation statements)

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“…Finally, a recent literature overview on investment's sensitivity to various financial factors carried out by Rizov (2007) shows that studies of investment behaviour rely heavily on the methodology developed by Fazzari et al (1988) who suggested testing for the presence of financial constraints based on the sensitivity of firm investment to the availability of internal funds (measured by cash flow). However, according to Zingales (1997, 2000) investment's sensitivity to cash flow cannot be regarded as a good indicator for financial constraints.…”

Section: Farm Investment Modelling In the Russian Contextmentioning

confidence: 99%

Exploring Farm Investment Behaviour in Transition: The Case of Russian Agriculture

Bokusheva¹,

Bezlepkina²

2009

J Agricultural Economics

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This paper analyses the investment behaviour of Russian farms during the period of economic stabilisation that followed Russia's financial crisis of 1998, and is the first to apply the error-correction investment model to describe farms' investment behaviour in the transitional context. Additionally, the paper employs the error-correction and the adjustment-cost model to test for differences in the investment behaviour between various farm categories. The results show that in general Russian farms exhibited an error-correcting behaviour in the period under investigation. From 1999 to 2005 the output-capital gap was closed by an average rate of 10% per year. Estimates of the adjustment-cost model show that Russian farm investments are very sensitive to the sales-capital ratio, suggesting that Russian farms exhibit increasing returns to scale and positive expectations about future revenues. Yet, such farm characteristics as ownership structure, access to input markets and also regional specifics were found to be decisive for farm investment not only in the short but long term too. Finally, the results show that the adjustment-cost model is adequate for the evaluation of differences in short-term investment behaviour, whereas it is noticeably less powerful for investigating differences in the farms' long-term investment behaviour. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 The Agricultural Economics Society.

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Section: Farm Investment Modelling In the Russian Contextmentioning

confidence: 99%

Exploring Farm Investment Behaviour in Transition: The Case of Russian Agriculture

Bokusheva¹,

Bezlepkina²

2009

J Agricultural Economics

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“…One of the key resources in the context of this research is the firms' financial capability to tackle the economic pressures from exchange rate changes and budget constraints. Prior research has found that under SBC firms' responses to business cycle shocks would differ compared to firms with hard budget constraint (Rizov, 2005;2008). Furthermore, under hard budget constraints, firms with high leverage are characterised by diminished borrowing capacity and face high bankruptcy costs.…”

Section: The Firm Capabilities -Low Vs High Leveragementioning

confidence: 99%

“…At the same time, the transitional Chinese economy features a unique institutional setting, where the state favours state-owned enterprises (SOEs) over the co-existing private firms (Lin and Tan, 1999;Cunningham, 2010) leading to the persistence of soft budget constraint (SBC) associated with SOEs (Kornai et al, 2003), alongside hard budget constraint for the rest of the economy. In this setting, the firms' financial capability, exemplified by their leverage (borrowing capabilities), is a key resource for firms to deal with economic shocks (Rizov, 2008). This research seeks to make two contributions to the literature.…”

Section: Introductionmentioning

confidence: 99%