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

Mohd Adib Ismail, Mansor H. Ibrahim, Mohammed Yusoff, Mohd Pisal Zainal

Research output: Contribution to journalArticle

9 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)29-44
Number of pages16
JournalInternational Journal of Economics and Management
Volume4
Issue number1
Publication statusPublished - Jun 2010

Fingerprint

Firm investment
Cash flow
Financial constraints
Malaysia
Capital stock
Panel data analysis
Complete information
Finance
Asymmetric information
Retained earnings
Fluctuations
Factor prices
Financing
Empirical results

Keywords

  • Cash flow
  • Financial constraints
  • Imperfect market
  • Investment
  • Panel data

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)
  • Business and International Management
  • Strategy and Management

Cite this

Financial constraints and firm investment in Malaysia : An investigation of investment-cash flow relationship. / Ismail, Mohd Adib; Ibrahim, Mansor H.; Yusoff, Mohammed; Zainal, Mohd Pisal.

In: International Journal of Economics and Management, Vol. 4, No. 1, 06.2010, p. 29-44.

Research output: Contribution to journalArticle

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