Financial Constraints in Investment. Panel Data Results From Estonia, 1995-1999

Mickiewicz, Tomasz; Bishop, Kate; Varblane, Urmas

doi:10.1556/aoecon.54.2004.4.2

Cited by 29 publications

(17 citation statements)

References 24 publications

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“…These results are in line with Arbeláez and Echavarría (2002), Campa and Shaver (2002), Harrison and McMillan (2003), and Mickiewicz et al (2004), and suggest that both dimensions of global engagement are associated with a lower degree of financial constraints.…”

Section: Resultssupporting

confidence: 83%

“…Along the first dimension of global participation, Campa and Shaver (2002) find that liquidity constraints are less binding for Spanish exporters compared to non-exporters; while Castañeda (2002) shows that export-oriented Mexican firms faced higher financial constraints before the 1995-2000 financial paralysis than after. Along the second dimension, and focusing respectively on Colombia, Côte D'Ivoire, and Estonia, Arbeláez and Echavarría (2002), Harrison and McMillan (2003), and Mickiewicz et al (2004) show that foreign owned firms face lower financial constraints compared to other firms. De Brun et al (2002) find no such evidence for firms in Uruguay 2 .…”

Section: Introductionmentioning

confidence: 99%

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Inventory Investment, Global Engagement, and Financial Constraints in the UK: Evidence from Micro Data

Guariglia

Mateut

2005

SSRN Journal

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The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. AbstractWe use a panel of 9381 UK firms to study the links between firms' global engagement status and their financial health. We estimate inventory investment equations augmented with a financial composition variable, and interpret the sensitivity of inventory investment to the latter as a measure of the strength of the financial constraints faced by firms. We find that smaller, younger, and more risky firms; and firms that do not export and are not foreign owned exhibit higher sensitivities. Moreover, global engagement substantially reduces the sensitivities displayed by the former categories of firms: this suggests that it shields firms from financial constraints. IntroductionA burgeoning literature has documented that, in an increasingly globalized world, exporters and foreign owned firms are larger, more productive, more capital-intensive, and pay higher wages than their purely domestic counterparts 1 . Yet, the effects of being an exporter or foreign owned on other firm characteristics have received much less attention. This paper seeks to fill this gap in the literature, by using a large panel of UK firms to study whether the two dimensions of firms' global participation, namely export behavior and foreign ownership, affect firms' financial health. Desai et al. (2008), who find that internal capital markets of multinational firms allow their affiliates to expand output after severe depreciations, when economies are fragile and prone to economic contractions; Blalock et al. (2008), who show that following the 1997 East Asian financial crisis which led to a dramatic currency devaluation, it was only those Indonesian exporters with foreign ownership who were able to increase investment significantly, while domestic firms were unable to do so due to financing constraints; and Harrison et al. (2004), who find that direct foreign investment is associated with a reduction of financing constraints for firms without foreign assets and for domestically owned enterprises. 3Our contribution to the literature is twofold. First, we study the effects of global engagement on firms' financial health in the UK. This is important because most of the studies that looked at similar issues generally considered developing or transition countries.Our choice of the UK is motivated by the fact that this country ranks high in terms of global engagement: it is the fifth largest exporter of manufactures in the world and the second largest host of multinational enterprises. Moreover, a rich firm-level dat...

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Section: Resultssupporting

confidence: 83%

Section: Introductionmentioning

confidence: 99%

Inventory Investment, Global Engagement, and Financial Constraints in the UK: Evidence from Micro Data

Guariglia

Mateut

2005

SSRN Journal

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“…We follow the literature and use a positive cash flow coefficient as evidence for hard budget constraints and an insignificant or negative cash flow coefficient as evidence for soft budget constraints (Mickiewicz, Bishop and Varblane (2004), Lizal and Svejnar (2002) …”

Section: Companies' Investment Rates and Ownership Groupsmentioning

confidence: 99%

“…There are several studies analyzing the impact of ownership structures on companies' investment in Central and Eastern European transition countries: Lizal and Svejnar (2002) (Czech Republic), Perotti and Vesnaver (2004) (Hungary), Mickiewicz, Bishop and Varblane (2004) (Estonia), Colombo and Stanca (2006) (Hungary). The following stylized facts emerge.…”

Section: Introductionmentioning

confidence: 99%

The impact of equity ownership groups on investment: Evidence from Ukraine

Mykhayliv

Zauner

2017

Economic Modelling

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“…100% in the US during the Chilean reform). Mickiewicz, Bishop and Varblane (2004) show that credit constraints were more severe and hindered investment among small and domestic firms before the reform in Estonia. At the same time, the economies were growing fast, indicating that plenty of productive investment opportunities were available.…”

Section: Bellak and Leibrecht 2009)mentioning

confidence: 98%

Macroeconomic effects of zero corporate income tax on retained earnings

Masso¹,

Meriküll²

2011

Baltic Journal of Economics

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Abstract:International tax competition has led to a lowering of corporate tax rates worldwide. Estonia was the first country to reduce the tax rate on retained earnings to zero, while distributed profits remained taxed at the pre-reform level. This paper seeks to analyse the effects of this unique tax reform implemented in year 2000. We apply a neoclassical exogenous growth general equilibrium model with an extension for endogenous corporate finance. Our findings indicate that the reform had a strong positive effect on capital accumulation and a modest positive effect on output and consumption, while preferential treatment of retained earnings increased equity finance and reduced debt finance.JEL codes: H25, O16, E21, P35

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Financial Constraints in Investment. Panel Data Results From Estonia, 1995-1999

Cited by 29 publications

References 24 publications

Inventory Investment, Global Engagement, and Financial Constraints in the UK: Evidence from Micro Data

Inventory Investment, Global Engagement, and Financial Constraints in the UK: Evidence from Micro Data

The impact of equity ownership groups on investment: Evidence from Ukraine

Macroeconomic effects of zero corporate income tax on retained earnings

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