Abstract

http://ssrn.com/abstract=2023828
 
 

Citations (7)



 
 

Footnotes (13)



 


 



Redefining Financial Constraints: A Text-Based Analysis


Christopher Ball


Meta Heuristica, LLC

Gerard Hoberg


University of Southern California - FBE Dept

Vojislav Maksimovic


University of Maryland - Robert H. Smith School of Business

February 7, 2012


Abstract:     
We score text in firms' 10-Ks to obtain for each firm an annual measure of investment delays due to financial constraints and separate measures of each firm's marginal constraints due to concerns with equity and debt financing.Contrary to the focus in the literature, we find that the key constraints are the financing of R&D expenditures rather than capital expenditures, and that the main friction firms face is raising equity capital to fund growth opportunities. We also find debt-market constrained firms more closely resemble distressed firms funding CAPX. Our measures predict investment cuts following the financial crisis better than other indices of financial constraints used in the literature. Since constraints are most binding within the populations of small and young rms these results point to the challenges that the financial system faces in funding innovation.

Number of Pages in PDF File: 62

Keywords: investment, financial constraint, equity, debt issuance, CAPX, R&D

JEL Classification: G31, G32, G30

working papers series





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Date posted: March 17, 2012  

Suggested Citation

Ball, Christopher and Hoberg, Gerard and Maksimovic, Vojislav, Redefining Financial Constraints: A Text-Based Analysis (February 7, 2012). Available at SSRN: http://ssrn.com/abstract=2023828 or http://dx.doi.org/10.2139/ssrn.2023828

Contact Information

Christopher Ball
Meta Heuristica, LLC ( email )
Fairfax, VA
United States
HOME PAGE: http://www.metaheuristica.com
Gerard Hoberg
University of Southern California - FBE Dept ( email )
Marshall School of Business
Los Angeles, CA 90089
United States
HOME PAGE: http://www-bcf.usc.edu/~hoberg/
Vojislav Maksimovic (Contact Author)
University of Maryland - Robert H. Smith School of Business ( email )
Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)
HOME PAGE: http://www.rhsmith.umd.edu/finance/vmax/
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