Scandinavian Working Papers in Economics

Working Papers,
Blekinge Institute of Technology, Department of Industrial Economics

No 2017/02: Investments, financial constraints in non-quoted Swedish Firms

Linda Dastory (), Johan Eklund () and Emil Numminen ()
Additional contact information
Linda Dastory: Royal Institute of Technology, Postal: Lindstedtsvägen 30, SE-114 28 , Stockholm, Sweden
Johan Eklund: Department of Industrial Economics, Blekinge Inst of Technology, Postal: Blekinge Tekniska Högskola, SE-371 79 , Karlskrona, Sweden
Emil Numminen: Department of Industrial Economics, Blekinge Inst of Technology, Postal: Department of Industrial Economics, Blekinge Inst of Technology, 371 79 Karlskrona, Sweden

Abstract: Using panel data from 10 573 non-quoted Swedish SMEs over the period 2006-2014, we examine how dependent investments made by Swedish SMEs are of internally generated cash-flows. To control for investment opportunities, we use an accelerator model. Applying a static accelerator model our result shows that, investment levels are in fact affected by the availability of internal funding. It takes between 2-2.5 years for the capital stock to adjust to shocks in demand. As the speed of the adjustment rate increases firms’ investment levels become more dependent on internal funding, indicating high adjustment costs. Finally, as firms become larger their investment level becomes less dependent on internal funding, indicating that it may be easier for larger firms to attract external funding.

Keywords: Non-quoted SMEs; Cash flow; Investments; Financial Constraints; Accelerator model.

JEL-codes: D92; E22

38 pages, December 12, 2017

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CapitalStockAdjustment20171212WP.pdf PDF-file 

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