The Influence Of Financial Constraints And Attitude Towards Risk In Corporate Investment Decisions

This paper presents evidence of the combined effect of financial constraints and attitudes towards risk in corporate investment. Using panel data on public companies functioning in developed countries, the author shows that demand uncertainty provokes a firm with limited resources to invest sub-optimally, compared to an unconstrained company. Also, with a given level of financial constraints, risk-taking companies tend to decrease investment to a lesser extent in comparison with risk-averse companies. To show this, an index of financial constraints has been constructed, and the optimal threshold values of the index and the risk aversion coefficient have been found.