Financing and Investment Interdependencies in Unquoted Belgian Compagnies: The Role of Venture Capital

National Bank of Belgium Working Paper No. 29

42 Pages Posted: 16 Oct 2010

See all articles by Sophie Manigart

Sophie Manigart

Vlerick Business School; Ghent University

Katleen Baeyens

Ghent University - Department of Accountancy and Corporate Finance

Ilse Verschueren

Vrije Universiteit Brussel (VUB)

Date Written: May 1, 2002

Abstract

There is ample empirical evidence that investments in (public) companies are correlated with cash flow. This may either be explained as evidence of financing constraints (Fazzari, Hubbard and Petersen, 1988), as excessive conservatism by managers, restraining investments to the internally generated cash flow (Kaplan and Zingales, 2000). We test the investment-cash flow sensitivity in unquoted Belgian companies with a modified sales accelerator model, using unbalanced panel data and GMM techniques. We show that investments in tangible fixed assets are positively related to cash flow. Contrary to our expectations, this sensitivity is not reduced, but it increases, when companies receive venture capital. We interpret the results as evidence of the presence of financing constraints and underinvestment problems in unquoted companies. Venture capital intermediaries are not able to eliminate financing constraints in Belgian unquoted companies.

Suggested Citation

Manigart, Sophie and Baeyens, Katleen and Verschueren, Ilse, Financing and Investment Interdependencies in Unquoted Belgian Compagnies: The Role of Venture Capital (May 1, 2002). National Bank of Belgium Working Paper No. 29. Available at SSRN: https://ssrn.com/abstract=1691993 or http://dx.doi.org/10.2139/ssrn.1691993

Sophie Manigart (Contact Author)

Vlerick Business School ( email )

Reep 1
Ghent, BE-9000
Belgium

Ghent University ( email )

Sint-Pietersplein 7
Gent, 9000
Belgium

Katleen Baeyens

Ghent University - Department of Accountancy and Corporate Finance ( email )

Bedrijfsfinanciering (RUG)
Kuiperskaai 55 E
Ghent, B-9000
Belgium

Ilse Verschueren

Vrije Universiteit Brussel (VUB) ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium
+32-2-629 21 93 (Phone)
+32 2-629 20 60 (Fax)

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