The Impact of Firm Collateral on Knowledge IntensiveConsulting Firms
2008 (English)Report (Other academic)
This paper explores how sales and employment for knowledge intensive consulting firms arecorrelated. I apply theory on cash flow-investment sensitivities, mostly applied tomanufacturing firms, to a less capital intensive part of the economy. Therefore theknowledge intensive consulting sector is investigated but instead of analyzing the investmentin plant and machinery this analysis regards the investment in skilled employees. Theargument of Kaplan & Zingales (1997) regarding low cash flow-investment sensitivity beinga sign of financial distress is applied. The main result is that firms less likely to be financiallyconstrained display 60 percent higher sales-employment sensitivities than firms more likelyto be financially constrained. The results are estimated from a sample comprising 23,500Swedish knowledge intensive consulting firms.
Place, publisher, year, edition, pages
CESIS, KTH Royal Institute of Technology , 2008. , 22 p.
CESIS Working Paper Series in Economics and Institutions of Innovation, 135
Incomplete markets, asymmetric information, knowledge intensive business services, economic development
IdentifiersURN: urn:nbn:se:kth:diva-72370OAI: oai:DiVA.org:kth-72370DiVA: diva2:487535
QC 201202082012-02-082012-01-312012-02-08Bibliographically approved