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Title: Three essays on the interplay between firms' financial constraints and investment cash flow sensitivities
Author: Oishi, Ryusuke
ISNI:       0000 0004 2741 6487
Awarding Body: University of Essex
Current Institution: University of Essex
Date of Award: 2012
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A firm is defined as financially constrained when its access to external source of financing is limited, resulting in difficulties with maintenance of efficient investment levels due to possible cash shortages. Such firms' investment levels are generally believed to be sensitive to their cash flows. However, two characteristics of the information asymmetry ('agency problem' and 'adverse selection problem') between firms' insiders and outsiders, can introduce some discrepancies to this financial constraint problems. Moreover, the above informational asymmetry characteristics can also depend on financial market behaviour. This thesis analyses the aforementioned financial constraint feedback mechanism. Specifically, in Chapter 2 we perform a comparative analysis of the firms in five leading G20 countries, and how the dynamics of their investment behaviour respond to financial market type. Two markets are considered - Anglo-Saxon market (present in the US and the UK), and bank-based market (present in Japan, Germany, and Korea). In addition, the investigation looks at the firm-specific attribute, banking affiliation, which is present in Japan, Germany and Korea. Our comparative analysis reveals that, on average, firms in the bank-based market are less likely to suffer from financial constraint problems. Moreover, the banking affiliation characteristic is found to play a significant role in firm financial constraint problem mitigation. In Chapter 3 we separately investigate the relationships between the US firms' financial constraints and two informational asymmetry problems, namely, agency problems involving the manager's over-investment incentives and the adverse selection problem originating from stock return volatility. Our empirical analysis identifies that the manager's over-investment incentive negatively impacts the firms' financial constraint status, moreover, the firms exhibiting higher stock return volatilities are more likely to be financially constrained.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available