Financial constraints and the interdependence of corporate financial decisions

Abstract Purpose This paper aims to examine the interdependence of financial decisions (investment, financing, dividends and cash-holding) under financial constraints. Design/methodology/approach The authors specify and estimate a system of simultaneous equations with panel data and firm fixed effects by three-stage least squares in a sample of firms from 62 countries from 1996 to 2010. Findings The main findings largely corroborate previous studies regarding the interdependence of financial decisions. The authors also find evidence suggesting that financial constraints have a major impact ...