Munich Personal RePEc Archive

“Financial constraints to enterprise investments: an international analysis on financial accounts of OECD countries”

Cinquegrana, Giuseppe and De Rita, Paola (2012): “Financial constraints to enterprise investments: an international analysis on financial accounts of OECD countries”.

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Abstract

Since the ’80s, economic literature has stressed the importance of external financing on enterprises’ investment decisions; in particular the pecking order theory highlighted the existence of a hierarchy of financing sources, an approach that originates from the existence of asymmetric information between fund borrowers and lenders. The presence of effective financial constraints to the realisation of investments of productive units was reasserted in the work by Fazzari, Hubbard and Petersen (1988), which was followed by ample empirical and theoretical analysis of enterprises’ information opacity, of the consequent effects on access to external financing and of the lower cost of financing originating from internal cash flows generated by enterprise management. The present contribution delves into the analysis of the possible existence of financial constraints to enterprises’ investment decisions in different OECD countries, using as analytical tools the indicators of the composition of financial instruments within the liabilities and the net lending-net borrowing for the sector of non-financial corporations. The sources of information are OECD databases on financial and nonfinancial accounts per institutional sector.

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