融资约束与公司投资 FHP_88 简介与分析

PART 1. OutlineMM theory founded the benchmark in corporate finance that firms’financing decision is irrelevant to the investment decision, which relies on the assumption that the market is efficient and frictionless. However, considering the reality of financial market, external financing doesn’t provide a perfect substitute for internal capital. In 1970s, Joseph E. Stiglitz first proved the tax structure has an impact on firms’ financing structure1and came up with the concept of financial constraint.In 1988’s classic paper, Fazzari, Hubbard and Petersen discussed extra costs of equity financing and debt which caused by capital market imperfections, especially asymmetric information. Via studying the investment behaviours in groups of firms categorised by a ratio of dividends to income, authors attempted to create links between financing constraints and investment varies. Their results supported that the sensitivity of investment to cash flow is a reliable indicator of corporates’ financial constraints. FHP’s researches provided several important perspectives on the topic.Kaplan and Zingales’s research challenged FHP’s conclusion. Basically, their study shows that high investment-cash flow sensitivity does not necessarily suggest firms are more financially constrained.Theoretically, even in a one-period model, examining the sensitivities of investment to W (internal funds) and to k (wedge between the internal and external costs of funds), authors could conclude that investment-cash flow sensitivity do not necessarily accord with the extent of financial constraints.Empirical evidence confirms the nonmonotonic relationship between these two factors.KZ analysed the 49 firms with abnormally high investment-cash flow sensitivity; by deeply exploring the fundamentals of sample firms (including operating efficiency, liquidity, financial statements and notes to annual reports for each fiscal-year), authors found that almost 40% of them were capable to increase investment in every year of the observing period.According to qualitative information in the annual reports and quantitative information in the financial statements and notes, KZ classified the 49 observations into five groups (NFC, LNFC, PFC, LFC and FC). Classifications result shows that cash stocks, cash flow, Q, unused lines of credit and interest coverage are monotonically declining from NFC to FC, which supports the validation of classification scheme. Critically, regressions reveal that the NFC firms exhibit the highest investment-cash flow sensitivity (coefficient is statistically greater than that of other firms).Reexamine validity of the finding: when splitting data into subperiods, the results still hold; 1Stiglitz, Joseph E. "Taxation, corporate financial policy, and the cost of capital." Journal of Public Economics 2.1 (1973): 1-34.when grouping firms based on quantitative criteria, the same results still hold.KZ’s conclusion on investment-cash flow sensitivity and financial constrain is conflicted with FHP’s. Possible reasons are as follows:•KZ applied Euler equation, avoiding the mismeasurement of Tobin’s Q2;•Fluctuations of outliers affected the sensitivities;• A few firms used cash flow to repay debt, which contribute to the nonmonotonic relationship.If the nonmonotonic relationship generally exists, further researches on investment behaviours are needed to find out the reason.PART 2. Critical EvaluationFinancial constraints should be considered in two ways. First, weather the internal funds are sufficient; second, whether or not the firm’s intrinsic characteristics make it costly to obtain a certain amount of external funds (KZ 2000). KZ’s research provided both theoretical and empirical views on the invalidity of investment-cash flow sensitivity as a measure of financial constraints.KZ delivered the one-period model to prove the nonmonotonicity; however, FHP (2000) stated the sensitivity to internal funds is likely to be irrelevant to financial constraints.An important contribution of KZ is that they used a multi-factor classification. Essentially, they selected several major indicators of firm’s financial condition, assuming that healthier firm’s may face less financial constraints. But these indicators, in some situations, cannot represent the firms’ true status.Cash--As a measure of liquidity, healthy firms usually hold adequate amount of cash and equivalent. However, this is not absolute because when a firm is in the disadvantage position of supply chain, it must maintain solvency by holding much cash. It’s reasonable to consider these firms are facing high external financing costs.Cash Flow--Cash flow is a good measure of the sufficiency of internal funds. But this indicator is extremely volatile that is not proper to measure a firm’s intrinsic characteristics hence the external financing constraints.Tobin’s Q--It’s an efficient indicator to firm’s investment chances. However, for firms in fast growing stage, investment usually grows in forms of increasing in inventories or account receivables etc. rather than fixed investment.Leverage--Conventionally, low leverage firms are considered facing less financial risk. But2Calculating Q at the beginning of a firm's fiscal year provides a better measurement of investment opportunities according to the regression of I on cash flow and on Q.one has to determine the source of low leverage. Some firms, mainly high-tech firms, which hold little collateral, are likely to be denied by banks; meanwhile do not have access to bond market. This indicator alone is not convincing.Manager’s words--For their own reputation, managers tend to provide good information about the firm.In conclusion, these indicators have limitations separately. However, when considering comprehensively, they can represent a firm’s financial status and thus the level of financial constraints.FHP apply dividend/income ratio as the classification criterion, which emphases on the sufficiency of internal funds. Obviously, KZ’s criteria consider more about the external financing costs via investigating the nature of firms. They focus on distinct perspectives of financial constraints.KZ's research was claimed due to the limit of samples and the lack of heterogeneity in samples. Furthermore, KZ’s samples are all manufacture firms, which in my opinion are potentially affected by some industrial factors or events. It will be more convincing if the author selected firms across different industrial. In 1999, Cleary obtains similar results for a large (over 1300) and undeniable heterogeneous sample of firms.The observation period is across more than one business cycle, which eliminates the disturbing from some special years.Financial constraints are still amount of the hottest topic in this field. Subsequent researches mainly focus on whether the investment-cash flow sensitivity to measure financial constraint is valid under different classification criteria.ReferenceBo, Hong, Robert Lensink, and Elmer Sterken. "Uncertainty and financing constraints." European Finance Review 7.2 (2003): 297-321.Cleary, Sean. "International corporate investment and the relationships between financial constraint measures." Journal of Banking & Finance 30.5 (2006): 1559-1580.Fazzari, Steven, R. Glenn Hubbard, and Bruce C. Petersen. "Financing constraints and corporate investment." (1988).Fazzari, Steven M., R. Glenn Hubbard, and Bruce C. Petersen. Financing constraints and corporate investment: Response to Kaplan and Zingales. No. w5462. National Bureau of Economic Research, 2000.Fazzari, Steven M., R. Glenn Hubbard, and Bruce C. Petersen. "Investment-cash flow sensitivities are useful: A comment on Kaplan and Zingales." The Quarterly Journal of Economics 115.2 (2000): 695-705.Kaplan, Steven N., and Luigi Zingales. "Do investment-cash flow sensitivities provide useful measures of financing constraints?." The Quarterly Journal of Economics 112.1 (1997): 169-215.Kaplan, Steven N., and Luigi Zingales. "Investment-cash flow sensitivities are not valid measures of financing constraints." The Quarterly Journal of Economics 115.2 (2000): 707-712.。