This paper uses a panel of 24,184 UK firms over the period 1993–2003 to study the extent to which the sensitivity of investment to cash flow differs at firms facing different degrees of internal and ...external financial constraints. Our results suggest that when the sample is split on the basis of the level of internal funds available to the firms, the relationship between investment and cash flow is U-shaped. On the other hand, the sensitivity of investment to cash flow tends to increase monotonically with the degree of external financial constraints faced by firms. Combining the internal with the external financial constraints, we find that the dependence of investment on cash flow is strongest for those externally financially constrained firms that have a relatively high level of internal funds.
Using a large panel of Chinese listed firms over the period 1998–2014, we document strong evidence of investment inefficiency, which we explain through a combination of financing constraints and ...agency problems. Specifically, we argue that firms with cash flow below (above) their optimal level tend to under- (over-)invest as a consequence of financial constraints (agency costs). Furthermore, focusing on under-investing firms, we highlight that the sensitivities of abnormal investment to free cash flow rise with traditionally used measures of financing constraints, while for over-investing firms, the sensitivities increase with a wide range of firm-specific measures of agency costs.
•We document strong evidence of investment inefficiency among Chinese listed firms.•We explain it through a combination of financing constraints and agency problems.•We focus on the sensitivities of abnormal investment to free cash flow.•For under-investing firms, these sensitivities rise with financing constraints.•For over-investing firms, the sensitivities increase with agency costs.
We use a panel of over 116,000 Chinese firms of different ownership types over the period 2000–2007 to analyze the linkages between investment in fixed and working capital and financing constraints. ...We find that those firms characterized by high working capital display high sensitivities of investment in working capital to cash flow (WKS) and low sensitivities of investment in fixed capital to cash flow (FKS). We then construct and analyze firm-level FKS and WKS measures and find that, despite severe external financing constraints, those firms with low FKS and high WKS exhibit the highest fixed investment rates. This suggests that an active management of working capital may help firms to alleviate the effects of financing constraints on fixed investment.
We investigate the extent to which financing constraints affect the innovation activities of over 120,000 mainly unlisted Chinese firms over the period 2000–2007. Based on a variety of specifications ...and estimation methods, we document that Chinese firms' innovation activities are constrained by the availability of internal finance. Specifically, private firms suffer the most, followed by foreign firms, while state-owned and collective enterprises are the least constrained. Moreover, the availability of internal finance represents a particularly binding constraint on the innovation activities of small firms, located in the coastal provinces, with low political affiliation, and fewer state shares, as well as for sole proprietorship firms.
•We investigate the link between cash flow and firm-level innovation activities.•We use a panel of 120,753 Chinese manufacturing firms over the period 2000–2007.•Innovation activities are constrained by the availability of internal finance.•The link is strongest for private firms, and weakest for state-owned enterprises.•The link is also strong for small coastal firms, without political affiliation.
•We investigate the link between cash flow and firm-level productivity.•We use a panel of 130,840 Chinese manufacturing firms over the period 2001–2007.•We find that TFP is strongly constrained by ...the availability of internal finance.•The link is stronger for illiquid foreign and private firms.•Foreign non-exporters display higher dependence of TFP on cash flow than exporters.
Financial factors have been found highly important in influencing firms’ real activities and in promoting aggregate growth. Yet, the linkage between finance and firm-level productivity has been overlooked in the literature. We fill this gap using a panel of 130,840 Chinese manufacturing firms over the period 2001–2007 to estimate a TFP model augmented with cash flow. We find that, especially for illiquid foreign and private firms, productivity is strongly constrained by the availability of internal finance. Furthermore, contrary to private firms, foreign non-exporters display higher dependence of productivity on cash flow than exporters.
Financial stress has been proposed as an economic determinant of depression. However, there is little systematic analysis of different dimensions of financial stress and their association with ...depression. This paper reports a systematic review of 40 observational studies quantifying the relationship between various measures of financial stress and depression outcomes in adults. Most of the reviewed studies show that financial stress is positively associated with depression. A positive association between financial stress and depression is found in both high-income and low-and middle-income countries, but is generally stronger among populations with low income or wealth. In addition to the "social causation" pathway, other pathways such as "psychological stress" and "social selection" can also explain the effects of financial stress on depression. More longitudinal research would be useful to investigate the causal relationship and mechanisms linking different dimensions of financial stress and depression. Furthermore, exploration of effects in subgroups could help target interventions to break the cycle of financial stress and depression.
Using a panel of Chinese listed firms over the period 1998–2015, we examine the extent to which liquidity impacts firms' acquisition decisions, method of payment choice, and performance following ...mergers. We observe that cash-rich firms are more likely to attempt acquisitions, especially if they are subject to tunneling. Next, we find that bidders with higher growth opportunities are less likely to use cash payments in acquisitions. This effect is stronger for financially constrained bidders, who face greater opportunity costs of holding cash. Our last set of results highlights the under-performance of cash acquisitions in both the short and long term.
•We document the effect of liquidity on Chinese firms' acquisition decisions.•Tunneling is a motivation for cash-rich firms to make acquisitions.•Greater growth prospects reduce bidders' willingness to use cash payments.•This is true especially for financially constrained firms.•Cash acquisitions underperform stock acquisitions in both the short and long term.
Using a panel of 79,841 Chinese firms over the period 2000–2007, we examine the extent to which liquidity constraints affect firms' assets growth. We find that state owned enterprises are not ...affected, while the availability of internal finance represents a binding constraint for the growth of private firms, especially those operating in coastal regions, with negligible foreign ownership. Thanks to their high productivity, cash flow is, however, so abundant for these firms that they are able to grow at a very fast rate, despite being discriminated against by financial institutions. Hence, well developed external capital markets may not always be needed for fast economic growth.
We use the 2011 and 2013 waves of the China Household Finance Survey (CHFS) to study the extent to which the acquisition of multiple houses is determined by the presence of male children in the ...family. We conjecture that, as a result of the very high sex ratio which can be observed in China following the one child policy, Chinese families who have a son may want to acquire additional dwellings to enhance the marriage chances of their son. In support of this argument, we find that families with male children aged 25 or older are most likely to acquire additional houses. This effect is highest in regions characterised by higher sex ratios, especially in rural areas.
Back pain is a common and costly health problem worldwide. There is yet a lack of consistent methodologies to estimate the economic burden of back pain to society.
To systematically evaluate the ...methodologies used in the published cost of illness (COI) literature for estimating the direct and indirect costs attributed to back pain, and to present a summary of the estimated cost burden.
Six electronic databases were searched to identify COI studies of back pain published in English up to February 2021. A total of 1,588 abstracts were screened, and 55 full-text studies were subsequently reviewed. After applying the inclusion criteria, 45 studies pertaining to the direct and indirect costs of back pain were analysed.
The studies reported data on 15 industrialised countries. The national cost estimates of back pain in 2015 USD ranged from $259 million ($29.1 per capita) in Sweden to $71.6 billion ($868.4 per capita) in Germany. There was high heterogeneity among the studies in terms of the methodologies used for analysis and the resulting costs reported. Most of the studies assessed costs from a societal perspective (n = 29). The magnitude and accuracy of the reported costs were influenced by the case definition of back pain, the source of data used, the cost components included and the analysis method. Among the studies that provided both direct and indirect cost estimates (n = 15), indirect costs resulting from lost or reduced work productivity far outweighed the direct costs.
Back pain imposes substantial economic burden on society. This review demonstrated that existing published COI studies of back pain used heterogeneous approaches reflecting a lack of consensus on methodology. A standardised methodological approach is required to increase credibility of the findings of COI studies and improve comparison of estimates across studies.
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