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Journal of Financial Economics Vol. 139 No. 2 2021

The Sources of Financing Constraints

Boris Nikolov1,2; Lukas Schmid3,4; Roberto Steri5,6

1 Swiss Finance Institute · 2 University of Lausanne · 3 University of Southern California · 4 Center for Economic and Policy Research · 5 University of Luxembourg · 6 Luxembourg School of Business

open access

Abstract

Which financial frictions drive firms’ financing constraints? We structurally estimate dynamic firm financing models embedding many financial frictions, on panels of public firms and private firms. We focus on limited enforcement, moral hazard, and trade-off models and assess which models rationalize best observed corporate policies across various samples. Our tests, based on empirical policy function benchmarks, favor trade-off models for larger public firms, limited commitment models for smaller public firms, and moral hazard models for Private firms. Our estimates suggest significant financing constraints due to agency frictions and highlight the importance of identifying their sources for firm valuation.

DOI
10.1016/j.jfineco.2020.07.018
Volume
139
Issue
2
Pages
478-501
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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