Enterprise Finance and Investment in Listed Hungarian Firms

29 Pages Posted: 23 Dec 2003

See all articles by Enrico C. Perotti

Enrico C. Perotti

University of Amsterdam - Finance Group; Centre for Economic Policy Research (CEPR)

Luka Vesnaver

University of Amsterdam

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Abstract

This paper studies the financing of enterprise investment in listed Hungarian firms during the first years of transition. These firms were selected for listing on the exchange and presumably had better access to external capital. In particular, we look for evidence of financial constraints that limit real investment and attempt to identify the effect of different ownership and governance structures. The empirical results indicate significant financial constraints even among the better-known firms in the period from 1992 to 1998. Consistent with studies from other countries, we find evidence that foreign-owned firms do not suffer from limited external finance. Previous leverage can strain investment, suggesting that hard budget constraints are binding. State ownership does not alleviate capital constraints and larger firms do not appear to be less constrained than the smaller firms, which contrasts with the evidence in Western countries.

Keywords: Transition, Corporate Governance, Hungary, Financial Constraints, Foreign Investors

JEL Classification: G3, P2

Suggested Citation

Perotti, Enrico C. and Vesnaver, Luka, Enterprise Finance and Investment in Listed Hungarian Firms. Available at SSRN: https://ssrn.com/abstract=459223 or http://dx.doi.org/10.2139/ssrn.459223

Enrico C. Perotti (Contact Author)

University of Amsterdam - Finance Group ( email )

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Amsterdam, 1018 TV
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+31 20 525 5285 (Fax)

HOME PAGE: http://www.fee.uva.nl/fm/people/pero.htm

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Luka Vesnaver

University of Amsterdam ( email )

Roeterstraat 11
Amsterdam, 1018WB
Netherlands
+31 20 525 4256 (Phone)
+31 20 525 5285 (Fax)

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