Financial frictions and the cash flow – external financing sensitivity: evidence from a panel of Pakistani firms

This paper uses a large panel of Pakistani non-financial firms over the period 2000-2013 to examine the role of financial constraints in establishing the relationship between cash flow and external financing.The results reveal that there exists a negative and significant relationship between external financing and cash flow.The finding of the substitutionary relation between internal funds availability and external financing has been viewed as evidence supporting the pecking order theory of capital structure.Yet,we show that this negative relationship is weak in case of financially constrained firms.We also analyze how credit multiplier affects external financing decisions of financially constrained and unconstrained firms.The results show that for financially unconstrained firms,the negative sensitively of external financing increases with asset tangibility.However,for financially constrained firms,the negative sensitivity of external financing to cash flow either decreases or turns positive as the tangibility of assets increases.This finding implies that financially constrained firms benefit more from investing in tangible assets because such assets not only help relax financial constraints but also having a potential to be a direct source of funds in periods of negative cash flow shocks.

The Impact of Capital Requirements on Companies＇ External Financing

The new prudential standards implemented by the Basel Committee treat banks＇ capital as a foundation for safety. The appropriate level of bank＇s capital helps to manage all kinds of risks with the special attendance on credit risk. The adequate capital base enables absorbing losses and maintaining bank＇s stability. The necessity to fulfill the capital requirements influences banks＇ credit policy and, as a result, the access to companies＇ external financing. The main purpose of the paper is to present the impact of the capital requirements implemented by Basel Committee （Basel III requirements） on companies＇ access to external finance. The paper discusses the changes in credit standards, the companies＇ external financing and formulates the prerequisites for the further development of companies＇ external financing. The paper contains the empirical data for largest European euro area countries regarding the GDP.

Future Prospects for Funding Strategies in Palestinian National Economy

On the international levels, funding has a wide importance in the sense that it is vehemently regarded as something that attracts both the developed countries and the developing countries. This is considered as the focal point of economy and economic activities. This is because of the fact that any economy can not continue without funding. This leads to a great care by institutions and governments as well as any social, political, and economic activity. The funding policy is regarded as one of the most important and active methods in having and preparing strategies that aim at having total control on private and public f＇mancial resources throughout financial activities to refresh the Palestinian economy. Due to the sensitivity of the current conditions, funding has a very important position and role. The deprivation stages the Palestirtian people have witnessed led to lack of Palestinian rights to build national institutions and bodies that are able to adopt social and economic policies that aim at having development as well as enabling the Palestinian entire society members to face both internal and external challenges and vice versa. There is vacuum of having an independent Palestinian state after 1967. There is a strict political s~,stem of lawful individuals and political domination, imposing by an Israeli military occupation to control and rule, controlling all Palestinian life to destroy the Palestinian economy and to distort the system without any lawful and constitutional independence. During the occupation period, the Palestinians lived under a lawful and managerial military power that destroys productivity paving the way to expel Palestinians out of their home which did not enable Palestinians to have their own social policies. The Palestinian national authority, ever since its rule, started to have a rehabilitation of its economic policies within a strategic plan that ensures economic development, stability, and geographical continuation amongst Palestinian resources control in a way that supports the Palestinian economy. That builds Palestinian policies to have economic development and improvement of general performance to develop, complete, and unify law and constitution. This also aims at Palestinian society development in terms of economy giving future hopes for Palestinians to have international development projects in the sense that any Palestinian strategy quickly faces lack of fund and therefore consequently everything is put to an end. The possibility of this study is to strengthen and stimulat the direct foreign investment as an alternative of the internal funding. Moreover, this study will investigate how to achieve an increase efficiency of investment and the national funding resources that generate income. The study＇s methodology is, descriptive analytical approach which has been applied because it matches the nature of this study. To answer study questions ＂What is the funding strategy followed by the Palestinian authority to develop the national economy？＂, confirmation is made that there are no funding strategies applied by the Palestinian authority to create funding mechanisms for development of national economy. This is not helpful for the national economy.

Financial System Design and Firm Investment in Malaysian Listed Firms

This paper investigates the impact of financial system design on investment. It is aimed to provide additional empirical evidence based on the original paper by Demirguc-Kunt and Maksimovic （2002）. The firm-level data of Malaysian companies between 2000 and 2007 are used. This paper also extends the previous literatures by using a panel data methodology, applying a random-effects estimator. The findings show that： First, the growth investment of firms are positively related to the development of the banking system but negatively related to the capital market. These firms substitute equity for debt associated with an increase in stock market activity （more long-term financing） and debt for equity in the presence of an increase in banking activity （less long-term financing）. Second, the internal growth financing, short-term growth financing and long-term growth financing have shown a significant impact on growth investment by firms. It implies that these financing constraints are complements to the development of banking system and stock market activity. Therefore, well-developed stock markets facilitate long-term financing, whereas a well-developed banking sector facilitates short-term financing. It is recommended that policy makers stress more on banking system for short-term financing and capital market for long-term financing.

Banking deregulation and corporate tax avoidance

We investigate whether tax avoidance substitutes for external financing. We exploit interstate banking deregulation as a quasi-external shock to examine whether firms engage in less tax avoidance after banking deregulation, because of cheaper and easier access to credit from banks. We find no empirical evidence to support this substitutive relation, even for firms with higher financial constraints or firms with higher external financing dependence.

Monetary policy, financial development and the financing of zombie firms: evidence from China

This paper examines the financing channels for zombie firms in China.We find that equity markets and suppliers provide substan-tial financing support for zombie firms,while banks and other financing channels are less important.We also find that the amount of investment does not increase accordingly after zombie firms obtain external financing,which indicates an inefficient use of funds by these zombie firms.Our results are robust to various definitions of zombie firms,and also to a propensity score match-ing method.