Measuring Financing Constraints Using Firm-Level Estimation of Investment-Cash Flow Sensitivities: A Bayesian Approach

40 Pages Posted: 7 Apr 2010

See all articles by Bert D'Espallier

Bert D'Espallier

Hogeschool-Universiteit Brussel (HUBrussel); Catholic University of Louvain (UCL) - Lessius University College

Jolien Huybrechts

KIZOK- Centre for Entrepreneurship and Innovation / Hasselt University

Félix J. López-Iturriaga

University of Valladolid - Department of Financial Economics and Accounting; National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy

Date Written: April 6, 2010

Abstract

We employ a Bayesian estimation technique to construct firm-varying investment-cash flow sensitivities (ICFS) for a sample of 90 Spanish listed firms over a 10-year period (1999-2008). Then we analyze which variables are associated with the firm-level ICFS-estimates both univariately and multivariately. The results indicate that firms with high ICFS are capital-intensive firms with high-growth rates that have exhausted much of their debt-capacity. Furthermore, high ICFS-firms have lower liquidity-measures, lower profitability-measures and lower stock-market valuation than their counterparts. These results provide strong evidence that high ICFS-firms have higher financing needs while faced with fewer available financing sources. Our analysis suggests that, at least for Spanish listed firms over the observed sample-period, the ICFS is an adequate proxy to measure the firm’s exposure to financing constraints.

Keywords: Financing constraints, investment-cash flow sensitivities, firm-level estimation, Bayesian estimation

JEL Classification: D92, E22, G30, G31

Suggested Citation

D'Espallier, Bert and Huybrechts, Jolien and Lopez-Iturriaga, Felix Javier, Measuring Financing Constraints Using Firm-Level Estimation of Investment-Cash Flow Sensitivities: A Bayesian Approach (April 6, 2010). Available at SSRN: https://ssrn.com/abstract=1585172 or http://dx.doi.org/10.2139/ssrn.1585172

Bert D'Espallier (Contact Author)

Hogeschool-Universiteit Brussel (HUBrussel) ( email )

Stormstraat 2
Brussels, 1000
Belgium

Catholic University of Louvain (UCL) - Lessius University College ( email )

Department of Business Studies
Korte Nieuwstraat 33
Antwerp, 2000
Belgium

Jolien Huybrechts

KIZOK- Centre for Entrepreneurship and Innovation / Hasselt University ( email )

Agoralaan - building D
Gebouw D
Diepenbeek, 3590
Belgium

Felix Javier Lopez-Iturriaga

University of Valladolid - Department of Financial Economics and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain
+34 983 184 395 (Phone)
+34 983 183830 (Fax)

HOME PAGE: http://www2.eco.uva.es/flopez

National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy ( email )

Lebedeva,27
Perm, Perm 614070
Russia

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