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The impact of the financial system's structure on firms' financial constraints
Boston College.
Jönköping University, Jönköping International Business School.
The University of Sheffield.
2011 (English)In: Journal of International Money and Finance, ISSN 0261-5606, Vol. 30, no 4, 678-691 p.Article in journal (Refereed) Published
Abstract [en]

We estimate firms’ cash flow sensitivity of cash to empirically test how the financial system’s structure and level of development influence their financial constraints. For this purpose we merge Almeida et al.’s work, a path-breaking design for evaluating a firm’s financial constraints, with that of Levine, who paved the way for comparative analysis of financial systems around the world. We conjecture that a country’s financial system, both in terms of its structure and its level of development, should influence the cash flow sensitivity of cash of constrained firms but leave unconstrained firms unaffected. We test our hypothesis with a large international sample of 30,000 firm-years from 1989 to 2006. Our findings reveal that both the structure of the financial system and its level of development matter. Bank-based financial systems provide constrained firms with easier access to external financing.

Place, publisher, year, edition, pages
2011. Vol. 30, no 4, 678-691 p.
Keyword [en]
Financial constraints, Financial structure, Financial development, Cash flow sensitivity of cash
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-23257DOI: 10.1016/j.jimonfin.2011.02.004OAI: oai:DiVA.org:hj-23257DiVA: diva2:690670
Available from: 2014-01-24 Created: 2014-01-24 Last updated: 2014-02-11Bibliographically approved

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Schäfer, Dorothea
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CiteExportLink to record
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Citation style
  • apa
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