Are firms’ expectations on the availability of external finance Rational, Adaptive or Regressive?

Anastasiou, Dimitrios and Giannoulakis, Stelios (2020): Are firms’ expectations on the availability of external finance Rational, Adaptive or Regressive?

Abstract

This study contributes to the literature of expectation formation mechanisms by bringing new evidence on how non-financial corporations shape their expectations on the availability of external finance. We link consecutive surveys from the Survey on the Access to Finance of Enterprises to investigate which expectation formation mechanism governs Eurozone firms regarding their expectations on the availability of external finance. In line with the past literature, we demonstrate that the Rational Expectations hypothesis is rejected by the data and we find evidence in favor of the Adaptive Expectation mechanism.

• Item Type: MPRA Paper
• Language: English
• Keywords: non-financial corporations; survey‐based expectations; expectation formation mechanisms; bank finance
• Subjects: D - Microeconomics > D0 - General; D - Microeconomics > D0 - General > D00 - General

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