Ownership Structure, Investment, and Liquidity Constraints: Evidence from German Manufacturing Firms

Posted: 3 Nov 2000

See all articles by Julie Ann Elston

Julie Ann Elston

Oregon State University - Cascades Campus; Oregon State University

Date Written: November 1994

Abstract

This paper presents evidence supporting the theory that informational and incentive problems in the capital markets affect firm investment. This hypothesis is tested by estimating investment equations for two groups of German manufacturing firms. The first group of firms are those with bank ownership, suggesting lower costs to banks of obtaining information and better access to capital for the firm. The second group contains independent firms, which are expected to face greater costs of external financing. Sensitivity to liquidity constraints is found to be greater for the independent firms. Findings also indicate divergence between groups in investment sensitivity over time.

JEL Classification: E22, E44, G32

Suggested Citation

Elston, Julie Ann, Ownership Structure, Investment, and Liquidity Constraints: Evidence from German Manufacturing Firms (November 1994). Available at SSRN: https://ssrn.com/abstract=6051

Julie Ann Elston (Contact Author)

Oregon State University - Cascades Campus ( email )

2600 NW College Way
Bend, OR 97701
United States

Oregon State University ( email )

228 Cascades Hall
2600 College Way
Bend, OR 97701
United States

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