Investment behavior and financing constraints in German manufacturing and construction firms : a bivariate ordered probit estimation

This paper investigates the effects of financing constraints on the dynamics of investment behavior for a sample of German firms. In contrast to most of the literature on this issue we use an indicator for financing constraints which we explain endogenously. The econometric method consists of a bivariate ordered probit model. We find that for firms facing financing constraints, the growth of investment is significantly lower than for non-constrained firms and is positively related to the growth rate of sales which has no influence for the unconstrained firms.