The Sources of Financing Constraints |
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| Authors: | Boris Nikolov Lukas Schmid Roberto Steri |
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| Institution: | 1. Faculty of Business and Economics at the University of Lausanne, Extranef 228, CH-1015, Switzerland;2. Swiss Finance Institute, and European Corporate Governance Institute (ECGI), Switzerland;3. Marshall School of Business, University of Southern California, 701 Exposition Blvd, Los Angeles, CA 90089, USA;4. Center for Economic Policy Research (CEPR), USA;5. Luxembourg School of Finance, University of Luxembourg, 6 Rue Richard Coudenhove-Kalergi, Luxembourg L-1359, Switzerland;1. Oslo Metropolitan University, Oslo Business School, Pilestredet 46, Oslo 0130, Norway;2. The Arctic University of Norway, Hansine Hansens veg 18, Tromsø N-9019, Norway;3. Department of Banking and Finance, Monash University, 900 Dandenong Rd., Caulfield East VIC 3145, Australia;1. Erasmus Scchool of Economics - Burgemeester Oudlaan 50, Erasmus University Rotterdam, Rotterdam PA 3062, the Netherlands;2. Tilburg University - Warandelaan 2, Tilburg AB 5037, the Netherlands;1. Department of Finance, Southern University of Science and Technology, 1088 Xueyuan Blvd., Shenzhen, Guangdong 518055, China;2. Department of Finance and Economics, Rutgers Business School, Rutgers University, 100 Rockafeller Road, Piscataway, NJ 08854, United States;3. Department of Finance, DePaul University, 1 E. Jackson Blvd., Suite 5500, Chicago, IL 60604, United States;1. Carroll School of Management, Boston College, 140 Commonwealth Avenue, Chestnut Hill, MA 02467, USA;2. Swiss Finance Institute at EPFL, Quartier UNIL-Dorigny, Extranef 213, Lausanne CH-1015, Switzerland;3. Carl H. Lindner College of Business, 2906 Woodside Drive, University of Cincinnati, Cincinnati, OH 45221, USA;1. Lundquist College of Business, University of Oregon, Eugene, OR 97403, United States;2. Department of Business & Information Technology, Missouri S&T, Rolla, MO 65409, United States |
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| Abstract: | Which financial frictions drive firms’ financing constraints? We structurally estimate dynamic firm financing models embedding many financial frictions, on panels of public firms and private firms. We focus on limited enforcement, moral hazard, and trade-off models and assess which models rationalize best observed corporate policies across various samples. Our tests, based on empirical policy function benchmarks, favor trade-off models for larger public firms, limited commitment models for smaller public firms, and moral hazard models for Private firms. Our estimates suggest significant financing constraints due to agency frictions and highlight the importance of identifying their sources for firm valuation. |
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