The Impact of Financing Constraints and Firm Performance

DOI

10.2991/978-94-6463-652-9_55How to use a DOI?

Keywords

Financing constraints; Corporate performance; Double fixed effect model

Abstract

This paper mainly concentrates on the correlation between financing constraints and firm performance. Therefore, this paper will provide more appropriate recommendations for different firms facing different levels of financing constraints, which can improve firm performance. As the theories of capital structure and corporate investment and financing decisions continue to evolve, the influence of financial constraints on corporate business development has emerged as a significant research focus within the realm of corporate finance. In the context of an imperfect capital market, factors such as information asymmetry, financial distress costs, and principal-agent issues contribute to disparities in financing costs between internal and external sources, ultimately resulting in widespread financial constraints faced by firms. Aligning with the pecking order theory of financing, enterprises prioritize internal financing when contemplating investment and financing strategies, followed by bond financing, and ultimately equity financing. Consequently, in scenarios where internal and external financing environments exhibit considerable disparities, the internal financing capacity of enterprises confronted with financing constraints becomes pivotal to their performance. Our objective is to explore whether and how the influence of financing constraints on globally listed firms has changed over a 20-year period from 2002 to 2022. This paper mainly confirms which financing constraints can have a positive and significant effect on firm performance to some extent. Therefore, enterprises should appropriately strengthen their degree of financing constraints in the listing process and operation in order to promote the further improvement of corporate performance.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Jianting Liu
PY  - 2025
DA  - 2025/02/24
TI  - The Impact of Financing Constraints and Firm Performance
BT  - Proceedings of the International Workshop on Navigating the Digital Business Frontier for Sustainable Financial Innovation (ICDEBA 2024)
PB  - Atlantis Press
SP  - 529
EP  - 536
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-652-9_55
DO  - 10.2991/978-94-6463-652-9_55
ID  - Liu2025
ER  -