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Financial constraints and firm investment in Malaysia: an investigation of investment-cash flow relationship

Ismail, Mohd Adib and Ibrahim, Mansor and Yusoff, Mohammed and Zainal, Mohd-Pisal (2010) Financial constraints and firm investment in Malaysia: an investigation of investment-cash flow relationship. International Journal of Economics and Management, 4 (1). pp. 29-44. ISSN 1823 - 836X

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Abstract

This paper investigates the presence of financial constraints among firms in Malaysia using firm level panel data analysis. The empirical results based on panel GMM demonstrate that financial constraints are present in the market, which indicate that the firms are unable to access to external forms of financing. In addition, the presence also signifies the presence of asymmetric information problem between the firm and its financer. Thus, the neoclassical investment theory which based on assumption of complete information such that only factor prices and technology determine firm’s desired capital stock is simply rejected. Eventually, their investments are much affected by fluctuations in their cash flows or retained earnings.

Item Type: Article (Journal)
Additional Information: 4178/1742
Uncontrolled Keywords: financial constraints, investment, cash flow, imperfect market, panel data
Subjects: H Social Sciences > HG Finance > HG4001 Financial management. Business finance. Corporation finance.
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button): Kulliyyah of Economics and Management Sciences
Depositing User: Professor Mohammed Yusoff
Date Deposited: 08 Sep 2011 16:54
Last Modified: 08 Sep 2011 16:54
URI: http://irep.iium.edu.my/id/eprint/1742

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