Financial Constraints Measures of Taiwan Listed Companies

Nowadays, the most common financial constraint measures in empirical studies are: Kaplan & Zingales Index (KZ Index), Whited & Wu Index (WW Index), Size & Age Index (SA Index), Cash Flow Sensitivity of Cash and Investment-Cash Flow Sensitivity. In this study, we try to use financial data of Taiwan TSEC & OTC listed companies to fit these models. The data period is from 2000 to 2014. We want to figure out which model is relatively proper for Taiwan listed companies. The empirical results show that the coefficients of the new KZ Index model are statistically significant. Also, the coefficients are quite similar to the traditional KZ Index. However, the coefficients of the new KZ Index model are not statistically significant during financial crisis. More clearly, whether we use the annual data from 2008 to 2009, or quarterly data from the third quarter in 2008 to third quarter in 2009, the coefficients of the KZ Index model are not statistically significant. Accordingly, the KZ Index model is not proper for Taiwan listed companies during the financial crisis.