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Table 2. 
Financing Constraints and Outward Foreign Direct Investment Decisions
Variable(1)(2)(3)(4)(5)(6)(7)(8)
Cash flowt−1 0.758***  0.896***  0.789***  0.864***  
 (0.111)  (0.129)  (0.120)  (0.285)  
Liquidityt−1  0.890***  0.966***  1.063***  1.856*** 
  (0.141)  (0.159)  (0.170)  (0.430) 
Sizet−1 −1.198** −1.523** −1.354** −1.579** −1.217** −2.236*** −1.940 −6.136*** 
 (0.531) (0.629) (0.539) (0.640) (0.569) (0.763) (1.573) (2.362) 
Capext−1     −0.00024 −0.746***   
     (0.00026) (0.283)   
Long-term borrowingst−1     0.109 0.961*   
     (0.517) (0.533)   
Age −0.156** −0.142* −0.141* −0.136* −0.122 −0.153* −0.121 −0.158** 
 (0.0776) (0.0787) (0.0767) (0.0785) (0.0783) (0.0793) (0.0748) (0.0641) 
TFPt−1 0.0613* 0.0545* 0.331*** 0.278*** 0.0725** 0.0662** 0.0556* 0.00650 
 (0.0322) (0.0320) (0.0740) (0.107) (0.0324) (0.0333) (0.0299) (0.0364) 
Exporter 0.477*** 0.449*** 0.471*** 0.451*** 0.380** 0.326** 0.285 0.128 
 (0.143) (0.157) (0.140) (0.156) (0.149) (0.160) (0.178) (0.217) 
Business group −0.319*** −0.177* −0.308*** −0.172 −0.461*** −0.276** −0.336*** −0.113 
 (0.0985) (0.105) (0.0968) (0.105) (0.114) (0.120) (0.093) (0.115) 
Debt ratiot−1 0.0180 −0.209 0.0335 −0.208 0.0586 −0.459 0.0109 0.0467 
 (0.208) (0.213) (0.206) (0.213) (0.344) (0.285) (0.198) (0.236) 
(Cash flow×TFP)t−1   −0.123***      
   (0.0301)      
(Liquidity×TFP)t−1    −0.068**     
    (0.0305)     
Time dummies Yes Yes Yes Yes Yes Yes Yes Yes 
Wald Chi2 343.59 303.63 373.73 306.81 285.67 260.16 405.18 703.73 
Prob. > Chi2 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 
Observations 5,645 5,645 5,645 5,645 4,297 4,297 5,645 5,645 
Variable(1)(2)(3)(4)(5)(6)(7)(8)
Cash flowt−1 0.758***  0.896***  0.789***  0.864***  
 (0.111)  (0.129)  (0.120)  (0.285)  
Liquidityt−1  0.890***  0.966***  1.063***  1.856*** 
  (0.141)  (0.159)  (0.170)  (0.430) 
Sizet−1 −1.198** −1.523** −1.354** −1.579** −1.217** −2.236*** −1.940 −6.136*** 
 (0.531) (0.629) (0.539) (0.640) (0.569) (0.763) (1.573) (2.362) 
Capext−1     −0.00024 −0.746***   
     (0.00026) (0.283)   
Long-term borrowingst−1     0.109 0.961*   
     (0.517) (0.533)   
Age −0.156** −0.142* −0.141* −0.136* −0.122 −0.153* −0.121 −0.158** 
 (0.0776) (0.0787) (0.0767) (0.0785) (0.0783) (0.0793) (0.0748) (0.0641) 
TFPt−1 0.0613* 0.0545* 0.331*** 0.278*** 0.0725** 0.0662** 0.0556* 0.00650 
 (0.0322) (0.0320) (0.0740) (0.107) (0.0324) (0.0333) (0.0299) (0.0364) 
Exporter 0.477*** 0.449*** 0.471*** 0.451*** 0.380** 0.326** 0.285 0.128 
 (0.143) (0.157) (0.140) (0.156) (0.149) (0.160) (0.178) (0.217) 
Business group −0.319*** −0.177* −0.308*** −0.172 −0.461*** −0.276** −0.336*** −0.113 
 (0.0985) (0.105) (0.0968) (0.105) (0.114) (0.120) (0.093) (0.115) 
Debt ratiot−1 0.0180 −0.209 0.0335 −0.208 0.0586 −0.459 0.0109 0.0467 
 (0.208) (0.213) (0.206) (0.213) (0.344) (0.285) (0.198) (0.236) 
(Cash flow×TFP)t−1   −0.123***      
   (0.0301)      
(Liquidity×TFP)t−1    −0.068**     
    (0.0305)     
Time dummies Yes Yes Yes Yes Yes Yes Yes Yes 
Wald Chi2 343.59 303.63 373.73 306.81 285.67 260.16 405.18 703.73 
Prob. > Chi2 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 
Observations 5,645 5,645 5,645 5,645 4,297 4,297 5,645 5,645 

TFP = total factor productivity.

Notes: This table reports the results of the ivprobit model on the probability of a firm investing abroad. Cash flow, size, age, and TFP are measured in logs. Exporter is a dummy for export status. Standard errors are reported in parentheses. ***, **, and * denote significance at the 1%, 5%, and 10% level, respectively. The mismatch of observations is due to missing values for the external finance variable. Columns (1) and (2) report the ivprobit results using cash flow and liquidity as measures of financing constraints and mean values of cash flow and liquidity as instruments, respectively. Columns (3) and (4) report ivprobit results controlling for interaction variables between cash flow and TFP, and liquidity and TFP, respectively. Columns (5) and (6) report ivprobit results using cash flow and liquidity controlling for external finance dependence. Columns (7) and (8) report ivprobit results using credit rating as the instrument for cash flow and liquidity instead of mean values of cash flow and liquidity.

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