TY - JOUR
T1 - Investment and financing constraints in China
T2 - Does working capital management make a difference?
AU - Ding, S.
AU - Guariglia, A.
AU - Knight, J.
N1 - Copyright 2012 Elsevier B.V., All rights reserved.
PY - 2012
Y1 - 2012
N2 - We use a panel of over 116,000 Chinese firms of different ownership types over the period 2000-2007 to analyze the linkages between investment in fixed and working capital and financing constraints. We find that those firms characterized by high working capital display high sensitivities of investment in working capital to cash flow (WKS) and low sensitivities of investment in fixed capital to cash flow (FKS). We then construct and analyze firm-level FKS and WKS measures and find that, despite severe external financing constraints, those firms with low FKS and high WKS exhibit the highest fixed investment rates. This suggests that an active management of working capital may help firms to alleviate the effects of financing constraints on fixed investment.
AB - We use a panel of over 116,000 Chinese firms of different ownership types over the period 2000-2007 to analyze the linkages between investment in fixed and working capital and financing constraints. We find that those firms characterized by high working capital display high sensitivities of investment in working capital to cash flow (WKS) and low sensitivities of investment in fixed capital to cash flow (FKS). We then construct and analyze firm-level FKS and WKS measures and find that, despite severe external financing constraints, those firms with low FKS and high WKS exhibit the highest fixed investment rates. This suggests that an active management of working capital may help firms to alleviate the effects of financing constraints on fixed investment.
UR - http://www.scopus.com/inward/record.url?partnerID=yv4JPVwI&eid=2-s2.0-84860550481&md5=1b9cf03851f6efebe574e704472e58a3
U2 - 10.1016/j.jbankfin.2012.03.025
DO - 10.1016/j.jbankfin.2012.03.025
M3 - Article
AN - SCOPUS:84875056876
SN - 0378-4266
JO - Journal of Banking & Finance
JF - Journal of Banking & Finance
ER -