Investment and financing constraints in China: does working capital management make a difference?

Ding, S. , Guariglla, A. and Knight, J. (2013) Investment and financing constraints in China: does working capital management make a difference? Journal of Banking and Finance, 37(5), pp. 1490-1507. (doi:10.1016/j.jbankfin.2012.03.025)

Full text not currently available from Enlighten.

Abstract

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 workingcapital and financingconstraints. We find that those firms characterized by high workingcapital display high sensitivities of investment in workingcapital 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 financingconstraints, those firms with low FKS and high WKS exhibit the highest fixed investment rates. This suggests that an active management of workingcapital may help firms to alleviate the effects of financingconstraints on fixed investment.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Ding, Dr Sai
Authors: Ding, S., Guariglla, A., and Knight, J.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Banking and Finance
Publisher:Elsevier Ltd.
ISSN:0378-4266
Published Online:03 April 2012

University Staff: Request a correction | Enlighten Editors: Update this record