Bhaumik, S.K., kumbhakar, S. and Sun, K. (2014) A note on a semiparametric approach to estimating financing constraints in firms. European Journal of Finance. Published online: 15 May 2014. ISSN 1466-4364
Abstract
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 average firm of ad hoc sub-samples of firms. We use firm-level data from India to highlight the advantages of our approach. Our results suggest that the estimates generated by this approach are meaningful from an economic point of view and are consistent with the literature.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2014 Taylor & Francis. This is an author produced version of a paper subsequently published in The European Journal of Finance. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | financial constraint, semiparametric approach, Robinson model |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Management School (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 16 Dec 2014 11:51 |
Last Modified: | 14 Mar 2018 18:03 |
Published Version: | http://dx.doi.org/10.1080/1351847X.2014.906068 |
Status: | Published |
Publisher: | Taylor & Francis (Routledge) |
Refereed: | Yes |
Identification Number: | 10.1080/1351847X.2014.906068 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:82519 |