Was bail-out a success? Evidence from the investment-cash flow relationship
The 1997-1998 Asian financial crisis affected the balance sheets of many Malaysian firms, which increased the financial constraints on such firms. To counter the impacts, the Malaysian government carried out various directed policy measures known collectively as the bail-out policy. The present pa...
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| Main Authors: | , , , |
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| Format: | Article |
| Published: |
Penerbit Universiti Kebangsaan Malaysia
2013
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| Online Access: | http://journalarticle.ukm.my/8087/ http://ejournal.ukm.my/jem/index |
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| Summary: | The 1997-1998 Asian financial crisis affected the balance sheets of many Malaysian firms, which increased the financial
constraints on such firms. To counter the impacts, the Malaysian government carried out various directed policy
measures known collectively as the bail-out policy. The present paper examines the success of the policy to reduce
the financial constraints. The present paper uses panel estimation methods to analyze the relationship between firms’
investments and their cash flows. The sample of study is split into two subsamples, consisting of the periods before
and after the financial crisis, respectively. The success of the policy is measured based upon the easing of financial
constraints faced by Malaysian firms. Using annual financial data, consisting of unbalanced panel from the period of
1988 to 2005, the results found favour the bail-out policy. This finding indicates the success of the bail-out policy to
reduce the severity of financial constraints.
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