Financial development, financial constraint, and firm investment: Evidence from Thailand

Lerskullawat, Attasuda

doi:10.1016/j.kjss.2018.01.010

Cited by 14 publications

(7 citation statements)

References 25 publications

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“…Similar results are reported by Becker and Sivadasan (2010), who conclude that financial development can mitigate financial constraints faced by the firm. The results from Lerskullawat (2018) agree with the findings of prior studies in terms of the relationship between financial development and financial constraints. Using data from nonfinancial companies in Thailand, the author finds evidence that financial development weakens the effect of financial constraints on corporate investment.…”

Section: Jeas 374supporting

confidence: 89%

Financial conditions, financial constraints and investment-cash flow sensitivity: evidence from Saudi Arabia

Guizani

Ajmi

2020

JEAS

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PurposeThe purpose of this paper is to examine whether the sensitivity of investment to cash flow varies with exogenous financial conditions.Design/methodology/approachA dynamic model of investment based on the Euler equation approach is employed to investigate the impact of macro-financial factors on the sensitivity of investment to cash flow. The sample comprises data from 84 non-financial firms listed on Saudi stock market over the period 2007–2018.FindingsThe results show that the sensitivity of investment to cash flow is positive, implying the presence of financing constraints for Saudi firms. Evidence also reveals that better financial conditions relax firms' financing constraints. However, contractionary monetary policy, poor financial development and liquidity crisis strengthen the dependence of firms on internally generated funds when undertaking new investment projects.Practical implicationsThe empirical results have useful policy implications. First, policymakers should pay attention to the importance of policymaking based on the monetary demand of microeconomic entities. In monetary contraction periods, firms face greater challenges in accessing external finance. These firms are likely to experience under-investment which at a macro level would translate into lower investments and economic growth for the country. Second, policymakers are encouraged to implement complementary measures that, coupled with existing financial reforms, may promote efficiency, competitiveness and transparency in firms' operations. Finally, managers and investors should consider financial structure and condition as important factors in their investment decision.Originality/valueThis study extends previous research by investigating whether the widely reported positive investment and cash flow relationship can be observed using data from an emerging market, specifically Saudi Arabia. It also sheds light on the investment-cash flow debate under a macroeconomic perspective and provides further evidence on the impact of financial crisis on the investment-cash flow (ICF) sensitivity.

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Section: Jeas 374supporting

confidence: 89%

Financial conditions, financial constraints and investment-cash flow sensitivity: evidence from Saudi Arabia

Guizani

Ajmi

2020

JEAS

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“…In the long run coefficient matrix, investment and credit are positively associated with GDP and vice versa (Chaitip et al, 2015;Wang et al, 2021). whereas real interest rate is inversely correlated with investment and GDP and vice versa while there is a positive association between credit and interest rate (Lerskullawat, 2018;Masoud & Hardaker, 2012). For short-term dynamics, we have employed general-to-specific approach proposed by Hendry and Krolzig (2004) and results of short-term dynamics are reported in Table-4 below.…”

Section: Vector Of Cointegration Test Statistic P-valuementioning

confidence: 99%

A Restricted Co-integration Analysis of Financial Development and Economic Growth: Evidence from Pakistan

Shah¹,

Kazmi

Bokhari³

et al. 2022

iRASD J. Manag.

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The current financial crises once again highlighted the importance of financial sector. Credit availability to firms improves the productivity and encourages private investment both through aggregated demand and aggregated supply. Accumulation of capital and its optimal utilization is important for sustainable growth of an economy. The objective of the current study is to find the effect of financial development on economic growth. The study utilized the restricted cointegration analysis to quantify the long run association between the financial development and economic growth. The result indicates that credit, GDP growth and private investment are cointegrated and in addition, credit trigger economic growth in long run via direct and indirect channel. The study suggested that easy access to credit should be given to augment economic growth.

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“…Countries with higher financial development level, i.e. financial institution and capital market sophistication, reduce the negative impact of firm financial constraints to under-investment problem (Lerskullawat, 2018;Naeem & Li, 2019). Based on above argument, our second and third hypotheses are as follows:…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…Investors that provide debt financing have greater concern to firm balance sheet. The weaker the balance sheet, investor will demand more compensation for higher risk taken in the form higher funding costs (Lerskullawat, 2018).…”

Section: Introductionmentioning

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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Financial development, financial constraint, and firm investment: Evidence from Thailand

Cited by 14 publications

References 25 publications

Financial conditions, financial constraints and investment-cash flow sensitivity: evidence from Saudi Arabia

Financial conditions, financial constraints and investment-cash flow sensitivity: evidence from Saudi Arabia

A Restricted Co-integration Analysis of Financial Development and Economic Growth: Evidence from Pakistan

The Relation between Dividend and Financial Constraints to Firm Value

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