The determinants of firms' performance: Can finance constraints improve technical efficiency? [An article from: European Journal of Operational Research]

This digital document is a journal article from European Journal of Operational Research, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
This paper analyses the mechanisms through which binding finance constraints can induce debt-constrained firms to improve technical efficiency to guarantee positive profits. This hypothesis is tested on a sample of firms belonging to the Italian manufacturing. Technical efficiency scores are computed by estimating parametric production frontiers using the one stage approach as in Battese and Coelli [Battese, G., Coelli, T., 1995. A model for technical efficiency effects in a stochastic frontier production function for panel data. Empirical Economics 20, 325-332]. The results support the hypothesis that a restriction in the availability of financial resources can affect positively efficiency.