Three Essays on the Effect of Alternative Ownership Structures on Investment and Financial Constraints: An Empirical Investigation

Abstract

Three Essays on the Effect of Alternative Ownership Structures on Investment and Financial Constraints: An Empirical Investigation This dissertation consists of three separate papers examining the relationship between investment, financial constraints and ownership structures. In the first paper new and rich panel data for a large and representative sample of firms are used to estimate the sensitivity of access to capital to differing ownership structures. The investment behaviour of firms is examined in a dynamic setting in the presence of adjustment costs, liquidity constraints and imperfect competition. The empirical work is based on the derivation of Euler equations in the presence of symmetric and quadratic adjustment costs and both debt and equity constraints. Whereas the norm is to use ad hoc approaches to model these constraints, our alternative and more consistent approach leads to the inclusion of financial variables in the investment equation in first differences rather than in levels. The GMM estimates confirm the importance of financial factors in determining investment rates and suggest that firms owned by insiders, especially non-managerial employees, are more prone to be liquidity constrained than are others. Among the other groups, somewhat surprisingly, only domestic outsider owned firms...

Three Essays on the Effect of Alternative Ownership Structures on Investment and Financial Constraints: An Empirical Investigation This dissertation consists of three separate papers examining the relationship between investment, financial constraints and ownership structures. In the first paper new and rich panel data for a large and representative sample of firms are used to estimate the sensitivity of access to capital to differing ownership structures. The investment behaviour of firms is examined in a dynamic setting in the presence of adjustment costs, liquidity constraints and imperfect competition. The empirical work is based on the derivation of Euler equations in the presence of symmetric and quadratic adjustment costs and both debt and equity constraints. Whereas the norm is to use ad hoc approaches to model these constraints, our alternative and more consistent approach leads to the inclusion of financial variables in the investment equation in first differences rather than in levels. The GMM estimates confirm the importance of financial factors in determining investment rates and suggest that firms owned by insiders, especially non-managerial employees, are more prone to be liquidity constrained than are others. Among the other groups, somewhat surprisingly, only domestic outsider owned firms...