Investment decisions and the soft budget constraint

This paper investigates the investment behaviour of a large panel of Hungarian firms in the period 1989–99, in order to assess the impact of institutional and regulatory changes on the efficiency of credit allocation. We find that the role of financial factors for investment decisions has changed significantly after the introduction of major financial reforms, and that firms were affected differently depending on their ownership type. Reforms have hardened the budget constraint of private domestic firms, particularly small ones, and reduced informational problems for foreign‐owned firms. State‐owned firms remained subject to a soft budget constraint. In particular, small state firms became more sensitive to financial conditions, whereas large state firms were unaffected and kept operating under a soft budget constraint.     

The impact of equity ownership groups on investment: Evidence from Ukraine

We empirically investigate the impact of different ownership groups on companies’ investment in Ukraine with a novel dynamic investment model where investment is based on present and historical levels of profitability (market-to-book value of equity) and lagged investment. Groups include state, insider, non-domestic, financial and financial and industrial group (FIG) ownership. Contrary to the literature, we find that the past level of profitability significantly affects investment; the majority presence of and increases in state ownership have a negative impact on firms’ investment, as is the case for non-domestic and financial companies’ ownership. Insider and FIG ownership have no impact on investment. We explain the results by the extent of liquidity concerns (hard and soft budget constraints), measured by cash flow interacted with a dummy variable of majority ownership of the respective group, and the extent of asset stripping for the corresponding ownership group and relate them to over- and under-investment, and to the free cash flow or cash constraint hypothesis.     

债务杠杆与企业投资:双重预算软约束视角

文章以我国2000~2004年的上市公司为样本,在政府、银行和企业三方的预算软约束框架内实证检验了企业投资支出和债务杠杆之间的关系。研究发现,企业投资支出整体上同债务杠杆呈负相关。但在国有绝对控股的上市公司中,企业投资支出对于负债水平不敏感,并且,随着国有股权比例的上升,企业投资支出对债务杠杆的敏感度逐渐下降。基于此,文章认为,政府对国有企业和国有商业银行同时实施的双重预算软约束是导致国有企业投资行为扭曲和债务治理机制失效的重要原因。     

FAMILY FIRMS,BANK RELATIONSHIPS,AND FINANCIAL CONSTRAINTS: A COMPREHENSIVE SCORE CARD

We examine the effect of financial constraints on firm investment and cash flow. We combine data from the Spanish Mercantile Registry and the Bank of Spain Credit Registry to classify firms according to whether they are family‐owned, not family‐owned, or belong to a family‐linked network of firms and according to their number of banking relations (with none, one, or several banks). Our empirical strategy is structural, based on a dynamic model solved numerically to generate the joint distribution of firm capital (size), investment, and cash flow, both in cross sections and in panel data. We consider three alternative financial settings: saving only, borrowing and lending, and moral hazard constrained state‐contingent credit. We estimate each setting via maximum likelihood and compare across these financial regimes. Based on the estimated financial regime, we show that family firms, especially those belonging to networks based on ownership, are associated with a more flexible market or contract environment and are less financially constrained than nonfamily firms. This result survives stratifications of family and nonfamily firms by bank status, region, industry, and time period. Family firms are better able to allocate funds and smooth investment across states of the world and over time, arguably done informally or using the cash flow generated at the level of the network. We also validate our structural approach by demonstrating that it performs well in traditional categories, by stratifying firms by size and age, and find that smaller and younger firms are more constrained than larger and older firms.     

INVESTMENT BEHAVIOUR,CORPORATE CONTROL,AND PRIVATE BENEFITS OF CONTROL: EVIDENCE FROM A SURVEY OF UKRAINIAN FIRMS

We analyse the impact of ownership and corporate control on firms’ investment using the 2001 survey of Yacoub et al. on Ukrainian firms. The model explains investment by output, financial and soft budget constraints, and corporate control (and ownership) categories potentially enjoying private benefits of control. We find that the corporate control model fits better than the ownership model, a negative relationship between state and employee control and firms’ investment, and evidence for the presence of soft budget constraints. A negative relationship between firms’ investment and the relative size of non‐monetary transactions strengthens the conclusion of private benefits of control impacting investment.     

投资-现金流敏感性:融资约束还是代理成本?

文章在控制Tobin’s Q衡量偏误的前提下,重新审视了中国上市公司的投资—现金流敏感性问题。结果表明,在控制衡量偏误的影响下,投资支出仍然对现金流非常敏感。然而,不同于前期研究,文章发现融资约束程度轻的公司反而表现出更强的投资—现金流敏感性。对此“反常”现象的动因检验表明:融资约束程度轻的公司倾向于过度投资,代理问题是导致现金流敏感性的主要原因;而融资约束较为严重的公司则表现为投资不足,信息不对称是导致现金流敏感性的主要原因。     

国有股权、经营风险、预算软约束与公司业绩:中国上市公司的实证发现

以中国上市公司为例,本文首次采用分量回归模型实证分析了国有股权对公司业绩的复杂影响。我们发现:在经营表现较差的上市公司,国有股东监督内部人的积极作用超过了行政或政治干预公司经营的消极作用;而在经营表现较好的上市公司,以上作用没有显著差异。源自国有股权并受经营风险影响的上市公司的预算软约束预期损害了所有公司的业绩。与经营表现较好的公司相比,在经营表现最差的公司,国有股东监督内部人的积极作用以及国有股权导致的预算软约束预期的消极作用都更为显著。虽然国有股权对公司业绩影响的净效果在所有上市公司中都为负,但在业绩最差的上市公司里负面作用最为突出。政策含义在于国有股权的调整应当从业绩最差的上市公司开始。     

Trade liberalization, heterogeneous firms and the soft budget constraint

We analyze the interaction between the soft budget constraint (SBC) and international trade by placing Segal’s (1998) SBC model within Melitz’s (2003) framework of international trade with heterogeneous monopolistically competitive firms. As in Segal’s model, SBC may result in moral hazard. The opening to international trade adds another sort of inefficiency. Some firms that would have become exporters in the absence of SBC choose to apply low effort and not export in order to extract a subsidy from the government. This effect takes place when the trade costs are sufficiently low. Overall, however, trade liberalization reduces inefficiencies generated by SBC. The number of firms subject to moral hazard SBC decreases, aggregate effort level increases and aggregate profits lost due to SBC-induced sub-optimal effort decline as trade costs decrease.     

Foreign ownership and investment: evidence from Korea

This study examines whether an increase in foreign ownership affects investment in Korea. Many studies have shown that in an imperfect financial market, a firm's investment depends on the availability of internal funds. If high foreigners’ shareholding is a sign of a firm's good financial position, and if foreign investors demand better corporate governance to protect their investments, then cash-flow sensitivity of investment decreases with the level of foreign ownership. Using data from Korean firms, it is found that cash-flow sensitivity of investment is lower in firms with high foreign ownership than in those with low foreign ownership. This finding is regarded as evidence for a potential benefit of open financial markets.     

How to Increase R&D in Transition Economies? Evidence from Slovenia

The recent initiative of the European Union Lisbon Agenda to increase levels of R&D investment is addressed by studying the determinants of R&D investment in one of the recent EU entrants, Slovenia. Previous empirical literature—mainly cross‐sectional in nature—has tested the demand–pull hypothesis and found that overall R&D expenses may be driven by output demand. We use a panel of more than 150 of the largest Slovene firms over the period 1996–2000, modeling firms' R&D behavior within an error‐correction framework and estimating it in a system GMM specification. While we find that sales have a significant role in inducing R&D expenditures, we also show that the availability of internal funds and wage bargaining represent important factors determining R&D expenses. Moreover, firms owned by insiders (workers and/or managers) and/or firms with dispersed ownership (small shareholders) display higher R&D investments than firms owned by privatization investment funds or by other firms.     

BAILOUTS IN FEDERATIONS: IS A HARD BUDGET CONSTRAINT ALWAYS BEST?*

This article analyses hard and soft budget constraints in a federation, where there is a moral hazard problem between the central and the regional governments. Regional governments can avoid a bailout from the center by exerting costly effort. In this setting, a hard budget constraint is not always optimal because it can provide excessive incentives for high effort, and thus discourage investment that is socially efficient. Thus, a hard budget constraint can imply the opposite kind of inefficiency that emerges under a soft budget constraint, where the common pool problem can give rise to inefficiently low effort and overinvestment.     

经济转型中的企业退出机制——关于北京市中关村科技园区的一项经验研究

本文运用来自北京市中关村科技园区的一套独特数据 ,从企业退出这个角度探讨决定中关村高科技企业成长的相关因素 ,尤其是企业的效率因素、企业负债和所有制性质 (或行政隶属关系 )对退出的影响。本文的基本发现是 ,效率高低日益成为决定中关村高科技企业生存的重要因素 ,这表明经过二十多年的经济改革开放 ,市场力量的重要性已日渐上升。另一方面 ,企业负债也成为制约企业生存与成长的重要因素。但是 ,企业净资产负债率对不同所有制企业的退出的影响也不尽相同 ,国有企业总体上不受其影响 ,而且行政隶属关系越高 ,所受影响也就越小 ;但净资产负债率对非国有企业则形成显著的压力。这说明传统计划体制下的预算软约束问题仍然没有消失。我们的研究还表明 ,随着时间的推移 ,行政隶属关系和所有制性质本身对企业生存提供的保护作用正在递减。     

Double moral hazard and renegotiation

We examine renegotiation in a double moral hazard model with an ex ante budget balancing constraint when both the principal and the agent are allowed to make a renegotiation offer even though the principal proposes an initial contract. Under a belief restriction, any perfect-Bayesian equilibrium leads to an allocation that is superior to the second-best allocation of the standard double moral hazard model without renegotiation. The result of this paper gives some reasons for the existence of intermediary organizations such as holding companies, law houses, consulting firms, investment banks or venture capital. The result can also provide the rationalization for a fund set up by a group of firms of the industry in which their product is legally required to be recyclable.     

中国企业投资与内部融资敏感性影响因素分析——来自中国制造行业上市公司的证据

以中国制造行业的上市公司为样本，研究投资一现金流敏感性的影响因素结果表明：投资支出对现金流很敏感，以企业规模作为度量融资约束的变量，未能支持融资约束影响投资与现金流敏感性的观点，以股利支付率作为度量融资约束的变量，检验结果为融资约束越强，投资与现金流敏感性程度越高的观点提供了证据。投资一现金流敏感性主要是信息不对称引起的融资约束所致。     

从股票错误定价看投资-现金流敏感性

在传统的投资-现金流敏感性研究基础上,本文运用中国上市公司2003-2008年面板数据,考察了盈余管理造成的股票错误定价对公司投资-现金流敏感性的影响.本文的实证结果表明:当股价处于上升通道中时(即投资者看好投资前景时),公司的投资-现金流敏感性较高,并且融资约束对公司的投资-现金流敏感性影响显著,但盈余操纵导致错误定价对公司投资-现金流敏感性影响不大;股指处于下降通道时,通过盈余操纵导致股价高估的公司,往往无法获得外部股权融资,只体现了更高的稳定股价和投资的意愿,因此,此类公司的投资-现金流敏感性较高.本文运用信息不对称理论,结合投资者情绪和管理者行为分析,对研究结果进行了解释并指出了后续研究的方向.     

A Soft Budget Constraint Explanation for the Venture Capital Cycle

Abstract. We explore why venture capital funds limit the amount of capital they raise and do not reinvest the proceeds. This structure is puzzling because it leads to a succession of several funds financing each new venture, which multiplies the well-known agency problems. We argue that an inside investor cannot provide a hard budget constraint while a less informed outsider can. Therefore, the venture capitalist delegates the continuation decision to the outsider by ex ante restricting the amount of capital he has under management. The soft budget constraint problem becomes the more important the higher the entrepreneur's private benefits are and the higher the probability of failure of a project is.     

CEO的财务经历有利于缓解企业融资约束吗*

CEO的财务经历有利于其做出合理的融资决策和投资决策,从而有助于降低企业融资约束。以2000—2013年沪深A股上市公司作为研究对象,本文实证检验结果证明了笔者的这一假设。该结论在控制内生性以及采用其他指标衡量融资约束等稳健性检验之后仍然成立。进一步检验结果表明,在外部融资条件较差时,CEO财务经历对于缓解融资约束的作用更为显著;同时,CEO财务经历有助于企业提高投资绩效。这表明了具有财务经历的CEO通过提高企业外部融资能力和投资决策的合理性,从而缓解企业融资约束。本文在丰富高阶梯队理论和融资约束领域文献的同时,对于上市公司制定科学合理的CEO聘任决策以及缓解融资约束等方面有重要的启示。     

Does macro-economy have any effect on firm investment-cash flow sensitivities?

We conduct an empirical study on Chinese listed firms’ investment-cash flow sensitivities in different stages of the macroeconomic cycle during 1993–2004, and find that macro-economy has a significant effect on investment-cash flow sensitivities. When economic slowdown occurred between 1998 and 2001, sample firms reduced working capital substantially to maintain some necessary investment level of fixed assets, that is, firms stabilized fixed assets investment by adjusting working capital. However, the sensitivity coefficients of fixed assets investment to cash or sales revenue were not systematically higher in the depressed stage than in the booming stage.      

Firm growth and productivity in Belarus: New empirical evidence from the machine building industry

Using a unique dataset comprising information for (up to) 153 firms in the machine building sector in Belarus, we investigate the determinants of firm growth for an economy where state ownership of enterprises is widespread. We use panel data models based on generalizations of Gibrat’s law, total factor productivity estimates and matching methods to assess the differences in firm growth between private and state-controlled firms. Our results indicate that labor hoarding and soft budget constraints play a particularly important role in explaining differences in performance between these two groups of firms.     

Form of Ownership and Financial Constraints:Panel Data Evidence From Flow of Funds and Investment Equations

This paper analyzes the effects of the form of ownership on the substitutability between internal and external sources of finance in Italy. In particular, we test whether financial constraints are more severe for independent firms compared to members of large national business groups and subsidiaries of foreign multinational corporations. The results obtained from flow of funds and investment equations estimated for a panel of Italian companies imply that independent firms face more severe financial constraints. In fact, not only members of national groups and subsidiaries of multinational corporations find it easier to substitute cash flow with external finance when the former falls but they do not display excess sensitivity to cash flow and debt in their investment decisions.