• Business
  • Published 2011

Which Institutions Reduce Financial Frictions and Facilitate Investment

@inproceedings{Claessens2011WhichIR,
  title={Which Institutions Reduce Financial Frictions and Facilitate Investment},
  author={Stijn Claessens and Kenichi Ueda and Yishay Yafeh},
  year={2011}
}
Using a model-based structural estimation first time in the literature, we investigate which cross-country institutional differences affect financial frictions when firms make investment decisions, and how. We develop a novel estimation procedure as well: To overcome flaws in common investment-cash flow regressions, we use a standard investment model but with explicit financial frictions and impose structural restrictions when measuring the impact of institutions. Our method is also shown to be… CONTINUE READING