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Financing Constraints (financing + constraint)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Financing Constraints, Ownership Control, and Cross-Border M&As: Evidence from Nine East Asian Economies

CORPORATE GOVERNANCE, Issue 6 2009
Yenn-Ru Chen
ABSTRACT Manuscript Type: Empirical Research Question/Issue: This study distinguishes between the effects of financial constraint determinants on cross-border mergers and acquisitions (M&As) and domestic M&As for all takeover bids announced in nine East Asian economies from 1998 to 2005. Research Findings/Insights: The results of logistic regressions verify that the extent of stock market and governance developments improves corporate financing conditions and subsequently encourages cross-border M&As in East Asia. The results also indicate that, except for ownership control variables, the firm-specific factors of financing constraints reduce the occurrence of cross-border M&As relative to domestic M&As. Although family- and state-controlled firms have better access to external financing, they are reluctant to risk diluting their management control and thus prefer domestic M&As to cross-border deals. Theoretical/Academic Implications: This study enhances the empirical studies of the relation between financing constraints and corporate investments based on the market imperfection hypothesis of corporate finance theories. In addition, this study also addresses the interaction between the market imperfection hypothesis and agency theory in explaining the effects of special ownership control on cross-border M&As relative to domestic deals. Furthermore, by examining the research questions across nine East Asian economies, this study provides an understanding of how such a relation applies to firms in countries where information asymmetry is high. Practitioner/Policy Implications: The findings indicate the importance of corporate governance and verify the effects of unique organizational structures on major corporate decisions. Specifically, family-controlled firms are often free of the financing constraints inherent in investment decisions. Thus, it is necessary to consider such organizational uniqueness when explaining the financing behavior of cross-border M&As conducted by Asian firms. [source]

Financing Constraints and Investment Decline in Mexico

THE MANCHESTER SCHOOL, Issue 1 2000
Talan B.
To what extent can financing constraints, which have been so central to foreign-debt-related explanations of investment decline in heavily indebted economies, account for low investment rates in Mexico after 1982? In order to investigate the implications of the financing constraints hypothesis on investment decisions, this study employs a cost-of-adjustment model of investment and annual panel data of Mexican manufacturing industries covering the period 1970,90. It is found that some of the debt crisis effects on investment, identified in the earlier literature, may be due to binding financing constraints in Mexico. [source]

Financing Constraints, Ownership Control, and Cross-Border M&As: Evidence from Nine East Asian Economies

CORPORATE GOVERNANCE, Issue 6 2009
Yenn-Ru Chen
ABSTRACT Manuscript Type: Empirical Research Question/Issue: This study distinguishes between the effects of financial constraint determinants on cross-border mergers and acquisitions (M&As) and domestic M&As for all takeover bids announced in nine East Asian economies from 1998 to 2005. Research Findings/Insights: The results of logistic regressions verify that the extent of stock market and governance developments improves corporate financing conditions and subsequently encourages cross-border M&As in East Asia. The results also indicate that, except for ownership control variables, the firm-specific factors of financing constraints reduce the occurrence of cross-border M&As relative to domestic M&As. Although family- and state-controlled firms have better access to external financing, they are reluctant to risk diluting their management control and thus prefer domestic M&As to cross-border deals. Theoretical/Academic Implications: This study enhances the empirical studies of the relation between financing constraints and corporate investments based on the market imperfection hypothesis of corporate finance theories. In addition, this study also addresses the interaction between the market imperfection hypothesis and agency theory in explaining the effects of special ownership control on cross-border M&As relative to domestic deals. Furthermore, by examining the research questions across nine East Asian economies, this study provides an understanding of how such a relation applies to firms in countries where information asymmetry is high. Practitioner/Policy Implications: The findings indicate the importance of corporate governance and verify the effects of unique organizational structures on major corporate decisions. Specifically, family-controlled firms are often free of the financing constraints inherent in investment decisions. Thus, it is necessary to consider such organizational uniqueness when explaining the financing behavior of cross-border M&As conducted by Asian firms. [source]

Financing Constraints and Investment Decline in Mexico

THE MANCHESTER SCHOOL, Issue 1 2000
Talan B.
To what extent can financing constraints, which have been so central to foreign-debt-related explanations of investment decline in heavily indebted economies, account for low investment rates in Mexico after 1982? In order to investigate the implications of the financing constraints hypothesis on investment decisions, this study employs a cost-of-adjustment model of investment and annual panel data of Mexican manufacturing industries covering the period 1970,90. It is found that some of the debt crisis effects on investment, identified in the earlier literature, may be due to binding financing constraints in Mexico. [source]

Financial Liberalization and Corporate Investments: Evidence from Korean Firm Data,

ASIAN ECONOMIC JOURNAL, Issue 3 2004
Jaewoon Koo
This paper examines whether financial liberalization procedures introduced in Korea in the early 1990s succeeded in relaxing financing constraints on firms. Because external funds are more costly than internal funds in an imperfect capital market, corporate investments depend on the availability of internal funds. As financial liberalization mitigates constraints on firms, the sensitivity of investments to cash flow can be reduced. Using panel data on Korean firms, we found that cash-flow effects on investment spending decreased drastically during the liberalization period. In particular, small, non-chaebol and established firms that were severely constrained gained most from liberalization. Chaebol firms appeared to lose preferential access to credit after liberalization. [source]