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  • 1 SSEES at University College London Senate House, Malet Street, London WC1E 7HU, UK
  • | 2 Office for National Statistics London, UK
  • | 3 Faculty of Economics and Business Administration at the University of Tartu Tartu, Estonia
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To investigate investment behaviour the present study applies panel data techniques, in particular the Arellano-Bond (1991) GMM estimator, based on data on Estonian manufacturing firms from the period 1995-1999. We employ the model of optimal capital accumulation in the presence of convex adjustment costs. The main research findings are that domestic companies seem to be financially more constrained than those where foreign investors are present, and also, smaller firms are more constrained than their larger counterparts.

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