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Financing constraints and small firm investment behaviour

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  • Besnik A. Krasniqi
  • Isa Mustafa

Abstract

The aim of the paper is to investigate the impact of financial constraints on investment behaviour of firms in Kosovo. This article uses data from the 2005 survey of small and medium-sized enterprises (SMEs) conducted by Riinvest Institute in order to test the investment-cash flow sensitivity hypothesis. For this purpose we use two regression techniques. First, we use ordinary least square (OLS) regression to estimate an investment equation model in order to test sensitivity of investment to cash flow. Then, we estimate a switching regression model as a robustness check in order to control for possible methodological biases of other studies. Econometric results do not support investment-cash flow sensitivity hypothesis after controlling for different sub samples of firms (i.e., firms that received a credit, firms that did not ask for credit and firms that were refused by banks) and methods.

Suggested Citation

  • Besnik A. Krasniqi & Isa Mustafa, 2011. "Financing constraints and small firm investment behaviour," International Journal of Entrepreneurship and Innovation Management, Inderscience Enterprises Ltd, vol. 14(2/3), pages 151-175.
    • Handle: RePEc:ids:ijeima:v:14:y:2011:i:2/3:p:151-175
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    Cited by:

    1. Debarati Ghosh & Meghna Dutta, 2021. "Investment behaviour under financial constraints: a study of Indian firms," SN Business & Economics, Springer, vol. 1(8), pages 1-15, August.
    2. Pranvera Dalloshi, 2018. "The Nexus between Bank Sources and Firms Capital Expenditures in SEE Countries," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 14(5), pages 255-267, OCTOBER.
    3. Simon Grima & Gani Asllani & Jonathan Spiteri & Nikson Daka, 2019. "The Cost and Information Management Effect in SMEs: An Empirical Analysis," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 360-369.
    4. Vlora Prenaj & Iliriana Miftari & Besnik Krasniqi, 2023. "Determinants of the Capital Structure of Non-Listed Companies in Kosovo," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 36-50.

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