publication . Article . 2014

A note on a semiparametric approach to estimating financing constraints in firms

Sumon Kumar Bhaumik; Subal C. Kumbhakar; Kai Sun;
Open Access English
  • Published: 15 May 2014
  • Publisher: Taylor & Francis (Routledge)
  • Country: United Kingdom
In this paper, we present a novel approach to modeling financing constraints of firms. Specifically, we adopt an approach in which firm-level investment is a nonparametric function of some relevant firm characteristics, cash flow in particular. This enables us to generate firm-year specific measures of cash flow sensitivity of investment. We are therefore able to draw conclusions about financing constraints of individual firms as well as cohorts of firms without having to split our sample on an ad hoc basis. This is a significant improvement over the stylized approach that is based on comparison of point estimates of cash flow sensitivity of investment of the av...
free text keywords: Economics, Econometrics and Finance (miscellaneous), Cash flow, Economics, Point estimation, Stylized fact, Finance, business.industry, business, Internal financing, Financial economics, Nonparametric statistics
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