Investment and Financial Constraints: Empirical Evidence for Firms in Brazil and China
نویسندگان
چکیده
In this paper we use panel data on rms from Brazil and China to investigate the role of nancial constraints for borrowing and investment. We develop a structural investment model, in which borrowing is costly but sometimes necessary to nance investment. Structural parameters are estimated by matching simulated model moments to empirical data, using a simulated minimum distance estimator. The estimated models suggest that the likelihood of being nancially constrained is about 0.45 for Brazil and 0.33 for China. Our analysis also shows that a reduction in the cost of external nancing would have signi cant e¤ects on both investment and borrowing. JEL Classi cation: E22, D92, D81, C15. Key words: Financing, investment, uncertainty, structural estimation. Acknowledgement: We thank the ESRC for nancial support under project RES-156-25-0006. Bond thanks the ESRC Centre for Public Policy at IFS for additional support. Söderbom thanks The Leverhulme Trust for additional support. Wu thanks the World Bank for additional support.
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