Are measures of corporate financial constraints universal? Evidence from Brazil.
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Balan, Phelipe, Norden, Lars
Financial constraints are a major impediment to economic growth. However, virtually all measures are calibrated with U.S. data and it is therefore not clear whether they work in other jurisdictions. Using data from Brazil during 1996–2022, we test how informative the KZ and SA indices are. We estimate panel regression models of corporate asset growth, market-to-book ratio, payout ratio and ROA on these indices. We find both indices exhibit the expected signs and are significantly related to these corporate outcomes. Finally, our models exhibit a better fit when we use data from the post-IFRS adoption period of Brazilian firms.
