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The influence of financial constraints on the investment-cash flow sensitivity in Dutch SMEs

Scheuten, Guus (2014) The influence of financial constraints on the investment-cash flow sensitivity in Dutch SMEs.

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Abstract:The focus of empirical literature on the relation between investment and internal finance is on the influence of financial constraints. However, literature is ambiguous whether this influence has a positive or negative effect on the relationship. Clearly, Povel & Raith (2007) combines the results of these studies and proved that the ICFS is U-shaped. This paper is guided by the following question: Do financial constraints influence the relationship between internal finance and investments of Dutch SMEs? The sample is divided by using the SA-index into financial constrained, financial unconstrained or neither of both. This index is used since older / larger firms are expected to be less financial constrained than younger / smaller firms. The data analyse provide Dutch evidence showing that internal finance is postively related with investment. Consequently, this study finds evidence that internal finance influence the investments for Dutch SMEs during the period 2009-2012. This conclusion is robust for different measures for sizes and controlled for investment opportunities and industries. The focus of this research is however on the influence of financial constraints on this relationship. The influence of financial constraints on this relationship is not proved
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/64723
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