Financial distress, financial constraint and investment decision: Evidence from Brazil

Bassetto, Camila Fernanda; Kalatzis, Aquiles Elie Guimarães

doi:10.1016/j.econmod.2010.09.003

Cited by 30 publications

(31 citation statements)

References 21 publications

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“…The third factor is related to financial imperfections in the form of hard budget constraints or financial constraints (Fazzari, Hubbard and Petersen (1988), see also Barran and Peeters (1998), Bassetto andKalatzis (2011), Wet (2004)). Under perfect capital markets without taxes and the assumption that the individual investor faces the same borrowing rate as firms, the capital structure of a company is irrelevant (Modigliani and Miller (1958)), that is, it does not matter whether internal or external funds are used to finance investment.…”

Section: Introductionmentioning

confidence: 99%

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

Mykhayliv

Zauner

2017

Economic Modelling

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Section: Introductionmentioning

confidence: 99%

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

Mykhayliv

Zauner

2017

Economic Modelling

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“…A research showed that companies that have high volatility in its operations and hold large amounts of cash have a sensitivity of investment to cash flow and experience financial limitations (Bassetto & Kalatzis, 2011). Cash flow can be a proxy for the profitability of the company in the future, and high investment growth may affect the company's performance.…”

Section: Investment Growth and Financial Distress (Hypothesis -H2)mentioning

confidence: 99%

Assessing Variables Affecting the Financial Distress of State-Owned Enterprises in Indonesia (Empirical Study in Non-Financial Sector)

Sayidah

Assagaf

2020

Business: Theory and Practice

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The financial distress of state-owned enterprises (SOEs) has become the main focus of numerous researchers due to the ongoing financial burden on the state and their inability to secure independent funding. The purpose of this study is to investigate the variables that affect the financial distress of SOEs in Indonesia that have received government subsidies. This research is a quantitative study conducted using secondary data collected from the Indonesian Stock Exchange, from a total of 19 SOEs from 2014 to 2017. The analysis found that investment (X2INV), leverage (X3LEV), cash flow from operating (X4CFO), and firm size (X5SIZE) have a significant negative effect on financial distress in SOEs. It means that increases in these variables will reduce the potential for corporate financial distress. While the independent working capital (X1WC) variable has no significant effect on financial distress, because it is temporary and has a dynamic change, so it is unable to show its influence on financial distress. SOE’s management that receives government subsidies can increase the amount of profitable investment to increase marginal revenue, thereby reducing financial distress. Higher leverage can reduce the level of financial distress, indicating that management uses debt to finance projects that generate higher marginal revenue than marginal costs. This condition has an impact on increasing operating cash flow. The higher the operating cash flow will reduce financial distress.

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“…Financial distress of firms is a vital topic in economic modeling, e.g., Bassetto and Kalatzis (2011) explored relationships among financial distress, financial constraint and investment decision in Brazil. Korol (2013) compared differences in forecasting bankruptcy among different regions of Latin America and Central Europe.…”

Section: Dataset 1: Firm Failure Prediction Prior To One Year Of Failurementioning

confidence: 99%

Small sample-oriented case-based kernel predictive modeling and its economic forecasting applications under n-splits-k-times hold-out assessment

Hong

et al. 2013

Economic Modelling

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Financial distress, financial constraint and investment decision: Evidence from Brazil

Cited by 30 publications

References 21 publications

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

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

Assessing Variables Affecting the Financial Distress of State-Owned Enterprises in Indonesia (Empirical Study in Non-Financial Sector)

Small sample-oriented case-based kernel predictive modeling and its economic forecasting applications under n-splits-k-times hold-out assessment

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