Financial Constraints, Productivity, and Investment: Evidence from Lithuania

December 9, 2022

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Karim Foda, Yu Shi, and Maryam Vaziri. Financial Constraints, Productivity, and Investment: Evidence from Lithuania, (USA: International Monetary Fund, 2022) accessed November 21, 2024

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.

Summary

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.

Subject: Aging, Financial statements, Labor productivity, Population and demographics, Production, Productivity, Public financial management (PFM)

Keywords: Aging, Balance sheet information, Evidence from Lithuania, Financial Constraints, Financial statements, Financing constraint, Firm age, Firm's age distribution, Global, Investment, Labor productivity, Productivity, SMEs, Transition Economies

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/249
Stock No:

WPIEA2022249
ISBN:

9798400227332
ISSN:

1018-5941

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