By Emilio Colombo
The ebook provides the result of an empirical research of the behaviour of Hungarian businesses throughout the transition technique focusing particularly at the position of monetary marketplace imperfections for company capital constitution and funding judgements. the consequences recommend that monetary marketplace reforms have succeeded, albeit partly, in hardening firms's finances constraints and enhancing the potency of the credits allocation method. particularly, following the creation of the banking zone reform and of the hot financial disaster legislations, price range constraints turned extra binding for small deepest companies, whereas informational charges turned much less proper for foreign-owned firms.
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Additional resources for Financial Market Imperfections and Corporate Decisions: Lessons from the Transition Process in Hungary
1999)). On the other hand, there seems to be a negative relation between debt and intangible assets. Long and Matiz (1985) find a negative relationship between the level of borrowing and investment rates in R&D, while they find a positive relationship between borrowing and investment in fixed capital. Both types of models presented in Sects. 2 predict a stock price decrease upon announcements of new equity issues: this prediction finds support in works by Asquith and MuUins (1986) and Masulis and Korvar (1986), among others.
Although survey studies do not have the statistical power of cross sectional or panel exercises, they allow to analyse more deeply the issues at stake. The results of Graham and Harvey are quite surprising, in that they find that executives rely heavily on practical, informal rules when choosing financial structure: debt policy is strongly affected by credit rating and by financial fiexibility, while equity policy is affected by earning per share dilution and recent stock prices appreciations. Some of these factors, like the fact that firms have preference over financial flexibility, and that they tend to issue equity when stock prices appreciates, are consistent with the pecking order theory.
In fact, more competitive banking markets have a positive contribution on economic growth. Third, the success of reforms depends crucially on the timing and extent to which hard budget constraints are imposed. In countries where hard budget constraints were imposed earlier and more effectively, agents and firms perceived immediately a correct set of incentives with positive effects on the economy as a whole. As we will see in the next paragraphs, the reform path chosen by the Hungarian authorities was very effective in all the aspects discussed above, and this explains the positive output performance described in Fig.
Financial Market Imperfections and Corporate Decisions: Lessons from the Transition Process in Hungary by Emilio Colombo