Differential effect of liquidity constraints on firm growth

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• 作者：Syed Manzur Quader ^{manzur@ciu.edu.bd}
• 关键词：Law of proportionate effects ; Financial constraints ; Growth cash flow sensitivity ; Leverage effect ; GMM
• 刊名：Review of Financial Economics
• 出版年：2017
• 出版时间：January 2017
• 年：2017
• 卷：32
• 期：Complete
• 页码：20-29
• 全文大小：368 K
• 卷排序：32

文摘

This paper uses generalized methods of moments (GMM) estimation to find differential quantitative effects of cash flow on growth among firms facing different degrees of financial constraints. The results indicate a substantially greater sensitivity of growth to cash flow for firm years belonging to the most binding financial constraint categories. To differentiate between binding and non-binding financial constraint categories, this paper mainly used a single time varying indicator of financial status considering all possible aspects of firm financial structure used in the literature. The results also suggest that, firms facing binding financing constraints can actually expand their size more than the extent of positive income shock they face supporting the leverage effect hypothesis. Moreover, the results in general reject Gibrat's law of proportionate effect.