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Financial Constraints, Productivity, and Investment: Evidence from Lithuania
Author:
Karim Foda
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,
Ms. Yu Shi
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, and
Maryam Vaziri
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Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 249
Language:
English
Publication Date:
09 Dec 2022
DOI:
https://doi.org/10.5089/9798400227332.001
ISBN:
9798400227332
ISSN:
1018-5941
Pages:
26
Keywords:
Financial Constraints; Productivity; Investment; SMEs; Transition Economies; financing constraint; firm age; evidence from Lithuania; firm's age distribution; balance sheet information; Labor productivity; Aging; Financial statements; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper studies the relation between firms' access to finance, labor productivity and investment using Lithuanian firm-level data from 2000–2018. To do so, we construct a measure of financial constraints. We estimate that, given firm characteristics, removing these constraints can improve average productivity and investment of firms in Lithuania by 0.51 percent and 7.2 percent, respectively. Our results further suggest that policies targeting firm age and size together will be more effective in mitigating the impact of financial constraints as the relationship between firm age and size with financial constraints exhibits non-linearities.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2022: Issue 249