Investment and Financing Constraints: What Does the Data Tell?
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Philip Vermeulen

Abstract
This paper analyses the presence of financing constraints in a large panel of German, French, Italian and Spanish firms. Nonparametric kernel density estimates of the difference between investment and cash flow are obtained. It is found that the density of this difference has a mode just below zero, indicating a clustering of firms investing at a level just below cash flow, indicating a cash flow constraint.
It is shown that those firms investing an amount around their cash flow pay on average higher interest rates and have lower cash reserves, providing further evidence that these firms are indeed constrained.