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Capital Market Imperfections Before And After Financial Liberization: An Euler Equation Approach To Panel Data For Ecuadorian Firms

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Author Info
Fabio Schiantarelli (Departmant of Economics Boston College)
Andrew Weiss (Boston University)
Fidel Jaramillo (Facultuad Latinoamericana de Ciencias Sociales)

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Abstract

Using a large panel of Ecuadorian firms, this paper analyzes the role of capital market imperfections for investment decisions, and investigates whether the financial reforms introduced in the 80ís have succeeded in relaxing financial constraints. The model allows both for an increase cost of borrowing, as the degree of leverage increases, and for a ceiling on a latter. The econometric results suggest both types of capital market imperfections are important for small and young firms, but not for large ones. Moreover, the estimated equations do not provide evidence that financial reform in Ecuador has helped to relax these financial restraints.

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Publisher Info
Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 221.

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Length: 28 pages
Date of creation: Dec 1993
Date of revision:
Handle: RePEc:boc:bocoec:221

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  1. Mark Gertler & R. Glenn Hubbard & Anil K. Kashyap, 1990. "Interest rate spreads, credit constraints and investment fluctuations: an empirical investigation," Finance and Economics Discussion Series 137, Board of Governors of the Federal Reserve System (U.S.).
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  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  3. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  4. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  5. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June. [Downloadable!] (restricted)
  7. Toni M. Whited, 1990. "Debt, liquidity constraints, and corporate investment: evidence from panel data," Finance and Economics Discussion Series 114, Board of Governors of the Federal Reserve System (U.S.).
  8. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Jaramillo, Fidel & Schiantarelli, Fabio & Weiss, Andrew, 1993. "The effect of financial liberalization on allocation of credit : panel data evidence for Ecuador," Policy Research Working Paper Series 1092, The World Bank. [Downloadable!]
  10. Blundell, Richard & Bond, Stephen & Devereux, Michael & Schiantarelli, Fabio, 1992. "Investment and Tobin's Q: Evidence from company panel data," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 233-257. [Downloadable!] (restricted)
  11. Whited, Toni M, 1992. " Debt, Liquidity Constraints, and Corporate Investment: Evidence from Panel Data," Journal of Finance, American Finance Association, vol. 47(4), pages 1425-60, September. [Downloadable!] (restricted)
  12. Calomiris, Charles W & Hubbard, R Glenn, 1990. "Firm Heterogeneity, Internal Finance, and 'Credit Rationing.'," Economic Journal, Royal Economic Society, vol. 100(399), pages 90-104, March. [Downloadable!] (restricted)
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  13. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June. [Downloadable!] (restricted)
  14. Galeotti, Marzio & Schiantarelli, Fabio & Jaramillo, Fidel, 1994. "Investment Decisions and the Role of Debt, Liquid Assets and Cash Flow: Evidence from Panel Data," Applied Financial Economics, Taylor and Francis Journals, vol. 4(2), pages 121-32, April. [Downloadable!] (restricted)
  15. Gertler, M.L. & Hubbard, R.G., 1988. "Financial Factors In Business Fluctuations," Papers fb-_88-37, Columbia - Graduate School of Business.
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  16. Michael Devereux & Fabio Schiantarelli, 1989. "Investment, Finacial Factors and Cash Flow: Evidence From UK Panel Data," NBER Working Papers 3116, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Nabi, Ijaz, 1989. "Investment in Segmented Capital Markets," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 453-62, August. [Downloadable!] (restricted)
  18. Tybout, James R, 1983. "Credit Rationing and Investment Behavior in a Developing Country," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 598-607, November. [Downloadable!] (restricted)
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