Liquidity constraints, Investment and Ownership (A Belgian high tech SMEs Panel Data Analysis)

Fathi, Et-taoufik Gailly, Benoît [UCL]

The main objective of this paper is to confront theoretical and empirical results about the determinants of investment decision of Belgian high tech SMEs. Limited research is available regarding this subject, such as the paper of Manigart (2002) on unquoted Belgian companies, and that of Van Cayseele (2002) on Belgian firms as a whole. We therefore believe that there is an interest in developing this subject, which has been extensively addressed in the United States, and to other developed countries by Fazzari, Hubbard and Petersen (1988), Rajan and Zingales (1997, 2000) and Goergen and Renneboog (2001). In this study, we used an accelerator sales model to express the relationship between investment and cash-flow. The investment is supposed, in this model, to be an increasing function of sales, but the model does not include the company's future growth opportunities. Thus, a positive correlation between investment and generated liquidity is supposed to highlight of the financing constraints. The results of our study show the existence, for the total sample, of an direct correlation between the generated cash-flows and the level of capital expenditures. The regressions also shows a larger and more significant coefficient in the case of young SMEs comparatively to the oldest ones, which indicates that these young SMEs are more affected by financing constraints.