How do Traditional Measures of Financial constraint--论文代写范文精选

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Abstract 
  The evidence presented in Section 3 suggests that firms classified as ‘constrained’ or ‘unconstrained’ by the five measures we examine do not actually differ, on average, in their ability to raise debt or equity capital. Does this mean there are no meaningful differences between these groups of firms? The fact that the empirical literature documents plenty of differences in behavior suggests that these measures do pick up important differences in firm types – just not, according to our tests, in financial constraints. The summary statistics and cross-tabulations in Table 1 suggest that public firms classified as ‘constrained’ by the dividends, ratings, HP, and WW measures look very different from ‘unconstrained’ firms (the KZ index is more of an outlier): ‘constrained’ firms tend to be younger, smaller, less profitable, and less leveraged than ‘unconstrained’ firms, but they also grow faster and invest more, particularly in R&D. In this section, we investigate differences in funding sources between ‘constrained’ and ‘unconstrained’ firms. As we will see, the five measures produce sample splits that differ markedly in terms of funding patterns.

  Table 9 shows the frequency with which ‘constrained’ and ‘unconstrained’ public firms raise equity from outside investors, sell bonds, or take out a loan. This reveals three important differences. First, ‘constrained’ firms are substantially more likely to fund themselves by issuing equity than are ‘unconstrained’ firms. For instance, 9.3% of non-dividend-payers raise equity from outside investors in a given year, while only 4.3% of dividend-paying firms do so (a difference that is significant at the 1% level). Firms classified as constrained by the KZ, HP, and WW indices similarly raise equity more frequently than ‘unconstrained’ firms. (The only exceptions are non-rated and rated firms, which both raise equity with almost exactly the same frequency.) 

  Second, ‘constrained’ firms rely much less heavily on bond issues than ‘unconstrained’ firms (except for the KZ index). For example, 21.3% of ‘unconstrained’ firms according to the HP index issue bonds in a given year, whereas ‘constrained’ firms very rarely do so (1.3%).35 This difference is mostly driven by issues of public bonds, which are rare among ‘constrained’ firms, but it persists if we focus on bonds issued under rule 144A or placed privately.36 Third, while ‘constrained’ firms do not use the bond markets much, they do regularly access the syndicated loan market: the fraction of ‘constrained’ firms obtaining a loan in a given year ranges from 9.8% for the HP index to 27.6% for the dividends measure. This is consistent with our finding in Test 1 that ‘constrained’ firms are able to borrow more when their demand for debt increases due to exogenous increases in state corporate income taxes. Apparently, much of this extra borrowing comes from loans rather than bonds.37

  Taken together, the results in Tables 1 and 9 suggest that the five financial constraints measures we examine do not generate a random partition of the universe of public firms. Rather (with the exception of the KZ index), they tend to identify as ‘constrained’ firms that are younger, smaller, and faster growing than ‘unconstrained’ firms. However, our three tests do not support the hypothesis that these firms face inelastic supply curves of debt or equity capital, and Table 9 confirms that these firms regularly access the public equity and bank-loan markets (though not the bond market). A plausible reading of the evidence is that the dividends, ratings, HP, and WW measures identify as ‘constrained’ those public firms that find themselves in the growth phase of their lifecycle. However, while these firms differ markedly from the more mature ‘unconstrained’ firms, they do not appear to be restricted in their ability to finance this growth, at least not during the average year in our sample period.

 Conclusions 
  Much empirical research in corporate finance proxies for financial constraints using measures that capture what firms say, do, or look like. We evaluate how well such measures identify firms that are financially constrained, using three novel tests that help identify the elasticity of a firm’s supply of capital curve: an exogenous increase in a firm’s demand for credit; exogenous variation in the local supply of bank loans; and the tendency for firms to pay out the proceeds of equity issues to their shareholders (“equity recycling”). We find that none of the five measures we evaluate is able to identify firms that behave as if they were in fact constrained. 

  Specifically, public firms classified as constrained for not paying dividends or not having a credit rating or according to the KZ, HP, or WW indices appear to have no trouble raising debt when their demand for debt increases exogenously; are unaffected by changes in the supply of bank loans; and engage in equity recycling. Furthermore, they differ little in these respects from supposedly unconstrained firms, even though they are much smaller and younger, grow considerably faster, and rarely access either the public or the private bond market. But they have ready access to both the equity market and bank lending, which appear to supply capital to them when they need it. Our results imply that popular measures of financial constraints identify as constrained subsets of firms that, while differing from the general population of firms on a number of dimensions, are not constrained in their ability to raise external funding. This suggests that extant findings that have been attributed to financial constraints are more likely to be caused by some other firm characteristics, such as size, age, growth rates, preferred funding source, or cost of capital.

  We have no reason to doubt that the firms Kaplan and Zingales (1997), Hadlock and Pierce (2010), and Whited and Wu (2006) originally identified as constrained in their respective samples truly were financially constrained. But our results make us skeptical of the popular practice to use the coefficients from these three studies to extrapolate to other samples and time periods in an effort to identify potentially constrained firms. As regards the other two measures, we note that paying a dividend or obtaining a credit rating are choices firms make endogenously and so may be more reflective of the firm’s lifecycle than its ability to raise external funding.38 So which firms are financially constrained and which firms are not? 

  Unfortunately, our methodological approach can only be used to test whether a particular measure identifies firms that are plausibly financially constrained – not to construct an alternative measure of financial constraints. The reason is that our tests identify behavior that is sufficient but not necessary for a firm to be classified as unconstrained. As a result, we cannot use the tests to unequivocally identify which firms are financially constrained and which are not. Having said that, when applied to two groups of firms that are plausibly financially constrained – small privately held firms and public firms with below investment-grade ratings – our tests are able to identify behavior that is consistent with our prior that these firms are indeed financially constrained. This highlights the general applicability of our tests. They can be used to test whether any proposed measure of financial constraints plausibly captures behavior consistent with being constrained.（essay代写)

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