Global Capital Flows and Financing Constraints
Firms often cite financing constraints
as one of their primary obstacles to investment. Global
capital flows, by bringing in scarce capital, may ease the
financing constraints of host country firms. But if incoming
foreign investors borrow heavily from domestic banks,
foreign direct investment may exacerbate financing
constraints by crowding host country firms out of domestic
capital markets. Combining a unique cross-country firm-level
panel with time-series data on restrictions on international
transactions and capital flows, Harrison, Love, and McMillan
find that different measures of global flows are associated
with a reduction in firm-level financing constraints. First,
the authors show that one type of capital inflow-foreign
direct investment-is associated with a reduction in
financing constraints. Second, they test whether
restrictions on international transactions affects the
financing constraints of firms. The results suggest that
only one type of restriction-those on capital account
transactions-negatively affects firms' financing
constraints. The authors also show that multinational firms
are not financially constrained and do not appear to be
sensitive to the level of foreign direct investment. This
implies that foreign direct investment eases financing
constraints for non-multinational firms. Finally, the
authors show that (1) foreign direct investment only eases
financing constraints in the non-G7 countries, and (2) other
kinds of flows, such as portfolio investment, have no impact
on financing constraints.
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Bibliographic Details
| Main Authors: |
Harrison, Ann E.,
Love, Inessa,
McMillan, Margaret S. |
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| Format: | Policy Research Working Paper
biblioteca
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| Language: | English
en_US |
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| Published: |
World Bank, Washington, DC
2002-02
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| Subjects: | ASSETS,
ASYMMETRIC INFORMATION,
BALANCE OF PAYMENTS,
BANK LOANS,
CAPITAL ACCUMULATION,
CAPITAL ALLOCATION,
CAPITAL FLOWS,
CAPITAL MARKETS,
CAPITALIZATION,
CASH EQUIVALENTS,
CLOSED ECONOMIES,
COMMERCIAL BANK LOANS,
COMPETITIVENESS,
CREDIT RATIONING,
CROWDING OUT,
DEBT,
DEPOSITS,
DEVELOPMENT ECONOMICS,
DIRECT INVESTMENT,
DISCOUNTED VALUE,
DIVIDENDS,
DOMESTIC CAPITAL MARKETS,
DOMESTIC INVESTMENT,
EMPIRICAL EVIDENCE,
EQUITY CAPITAL,
EXCHANGE RATE,
EXPORTS,
EXTERNAL FINANCING,
FINANCIAL INSTITUTIONS,
FINANCIAL INTERMEDIARIES,
FIXED CAPITAL,
FOREIGN ASSETS,
FOREIGN CURRENCY,
FOREIGN DIRECT INVESTMENT,
FOREIGN FIRMS,
FOREIGN INVESTMENT,
FOREIGN INVESTORS,
FOREIGN OWNERSHIP,
GDP,
GLOBAL CAPITAL,
GNP,
GNP PER CAPITA,
GROSS DOMESTIC PRODUCT,
GROWTH RATE,
IMPORTS,
INCOME,
INCOME LEVELS,
INTEREST RATE,
INTEREST RATES,
LESS DEVELOPED COUNTRIES,
LIQUID ASSETS,
LIQUIDITY,
M2,
M3,
MARGINAL COST,
MARGINAL PRODUCT,
MARKETABLE SECURITIES,
MERGERS,
NPV,
OPTIMIZATION,
PERFECT COMPETITION,
POLICY MAKERS,
PORTFOLIO,
PRESENT VALUE,
PRODUCTION FUNCTION,
PRODUCTIVITY,
PROFIT MAXIMIZATION,
RATIONAL EXPECTATIONS,
REAL GDP,
REAL GNP,
SAVINGS,
SCARCE CAPITAL,
SECURITIES,
SURCHARGES,
VALUATION,
VARIABLE COSTS,
WORKING CAPITAL GLOBAL CAPITAL,
FOREIGN DIRECT INVESTMENTS,
TIME-SERIES ANALYSIS,
CROSS COUNTRY ANALYSIS,
CAPITAL INFLOWS,
CAPITAL ACCOUNT,
MULTINATIONAL ENTERPRISES,
PORTFOLIO INVESTMENT,
CASH FLOW,
GLOBALIZATION, |
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| Online Access: | http://documents.worldbank.org/curated/en/2002/02/1715999/global-capital-flows-financing-constraints
http://hdl.handle.net/10986/15615
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