The determinants of firms' performance: can finance constraints improve technical efficiency?

Vania Sena*

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

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. © 2004 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)311-325
Number of pages15
JournalEuropean Journal of Operational Research
Volume172
Issue number1
DOIs
Publication statusPublished - 1 Jul 2006

Keywords

  • finance constraints
  • productivity and competitiveness
  • technical efficiency

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