Investment and Financing Constraints in Iran

Since the level of fixed investment is costly for firms, they always search for ways to maintain it; however, financing constraints prevent the realization of this goal. In this article, a panel of over 134 stock firms over the period 2005-2011 was used to study the linkages between investment in fixed and working capital and financing constraints. To this end we have analyzed the relation between investment, cash flow, tangible fixed assets, working capital, and fixed investment. The results obtained indicate that an active management of working capital may help firms alleviate the effects of financing constraints on fixed investment. Nevertheless, they did not examine the input of working capital management of the company.