Demir, Firat (2007): Private Investment and Cash Flow Relationship Revisited: Capital Market Imperfections and Financialization of Real Sectors in Emerging Markets.
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Based on the Euler equation approach, the paper analyzes the impacts of availability of internal funds on fixed investment spending in the presence of multiple investment options. It is argued that after financial liberalization real sector firms face a portfolio allocation problem between fixed and financial investments. Therefore, depending on the respective rates of returns the availability of internal funds may be a necessary but not sufficient condition for financing real investment projects. The empirical results using firm level data for Mexico and Turkey confirm this hypothesis and suggest that profits from fixed and financial assets have differential effects on fixed investment spending.
|Item Type:||MPRA Paper|
|Institution:||University of Oklahoma|
|Original Title:||Private Investment and Cash Flow Relationship Revisited: Capital Market Imperfections and Financialization of Real Sectors in Emerging Markets|
|Keywords:||Private Investment; Financing Constraints; Cash Flow; Portfolio Choice|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E22 - Capital; Investment; Capacity
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C33 - Models with Panel Data; Longitudinal Data; Spatial Time Series
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
|Depositing User:||Firat Demir|
|Date Deposited:||04. May 2007|
|Last Modified:||18. Feb 2013 10:22|
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