LIQUIDITY AND BUSINESS INVESTMENT - EVIDENCE FROM DUTCH PANEL-DATA

Several recent studies have focused on the impact of liquidity on busi ness investment. We analyze the relevance of this approach for The Net herlands. It turns out that the impact of internal funds on Dutch busi ness investment is relatively strong. With respect to the use of crite ria to classify firms on a priori beliefs concerning asymmetric inform ation, the dividend policy, size and age of firms tum out not to be im portant, but the existence of organizational ties between banks and fi rms turns out to be very significant. In our view, the relatively larg e overall impact of liquidity on business investment and the relevance of the relationship between banks and firms are both evidence of the institutional features of the Dutch market for investment funds.