and the test of the overidentifying restrictions. In particular, the rejection of the overidentifying restrictions might imply that the composite error term is correlated with the instruments such as the land value or the cash flow, and hence it will support the existence of the borrowing constraints and its dependence on the land asset or the cash flow.

Out of the fourteen industries chosen there are only three industries which satisfies both non-negativity of the adjustment cost parameter and acceptance of the overidentifying restrictions, irrespective of the choice of the covariance matrix estimate. They are textiles, fabricated metal products, and real estate industries. Among the industries that violate the above conditions, the adjustment cost parameters are negative for food and beverages, pulp, paper and paper products, chemicals, and electrical machinery. For manufacturing, non-ferrous metal and machinery industries, although the adjustment cost parameters are significantly positive, the overidentifying restrictions are rejected when the unconstrained covariance matrix with the Lagrangian multiplier as a function of the cash flow is employed. For the other four industries (all industries, construction, steel, and wholesale and retail trade) the overidentifying restrictions are rejected whichever covariance matrix is employed, suggesting the existence of the borrowing constraints.

Now we examine whether the estimation results are improved when the borrowing constraints are explicitly taken into consideration. We estimate the Euler equation (14) with the Lagrangian multiplier as a linear function of the value of land stock or the cash flow, as is expressed by eqs.(15) and (16). Table 2 shows the estimation results for the industries where the coefficients of the land value or the cash flow in the Lagrangian specification are negative. There are only five industries which do not satisfy this condition: textiles, pulp, paper and paper products, non-ferrous metal, machinery, and electrical machinery. For the other industries, by contrast, the model is greatly improved by allowing for the borrowing constraints. For all industries, construction, manufacturing, food and beverages, chemicals, steel, wholesale and retail trade, the overidentifying restrictions are not rejected any longer and moreover the $ \chi^{2} $ test of the borrowing constraints rejects the hypothesis that the parameters characterizing the Lagrangian multiplier are jointly zero. Indeed land asset played a vital role in mitigating the borrowing constraints in all industries, construction, manufacturing, chemicals, steel, and wholesale and retail trade industries, while the cash flow is an important factor to mitigate the borrowing constraints in all industries, construction, manufacturing, food and beverages, chemicals, and wholesale and retail trade. For metal products and real estate industries the cash flow variable works to mitigate the borrowing constraints, but the $ \chi^{2} $ test of the borrowing constraints cannot reject the hypothesis that the parameters characterizing the Lagrangian multiplier are jointly zero.

To sum up, the estimation results reveal that the land asset or the cash flow played a vital role in lightening the burden of the borrowing constraints in many industries. $ ^{10)} $