Liquidity Constraints and Investment in Transition Economies : The Case of Bulgaria
The authors use firm level data on Bulgaria to investigate the impact of liquidity constraints on firms investment performance. Internal funds are a important determinant of investment in most industrial economies. The authors use a simple accelera...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2015
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2000/01/438413/liquidity-constraints-investment-transition-economies-case-bulgaria http://hdl.handle.net/10986/22280 |
| Summary: | The authors use firm level data on
Bulgaria to investigate the impact of liquidity constraints
on firms investment performance. Internal funds are a
important determinant of investment in most industrial
economies. The authors use a simple accelerator model of
investment to test whether liquidity constraints are
relevant in Bulgaria's case. Their estimates are based on
data for 1993-95, before Bulgaria's financial crisis of
1996-97. It turns out that Bulgarian firms are
liquidity-constrained and that firms size and financial
structure help to distinguish between firms that are more
and less liquidity-constrained. In the authors' view,
liquidity constraints in transition economies should be
interpreted in different ways than those in industrial
economies. In Bulgaria, liquidity constraints, and hence
access to external funds should be seen in the context of
soft budget constraints and the financial systems failure to
enforce the efficient allocation of funds. The relationship
between liquidity constraints and firm characteristics may
actually be the opposite of what is normally the case in
industrial countries. In Bulgaria, lack of liquidity
constraints may be a sign of financial weakness. |
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