Financial Constraints, Investment, and Liquidity: Evidence from Russian Companies

This paper estimates the degree of financial constraints faced by Russian publicly traded companies using the two most common approaches in the literature. We find that both Russian company investment and cash holdings are sensitive to cash flows, suggesting that the average sample firm is financially constrained. State-owned companies appear less financially constrained. After 2014, when economic sanctions restricted access to foreign capital, Russian companies became more financially constrained and more dependent on accumulated cash reserves. Overall, our findings highlight the importance of financial constraints in the context of developing countries.