Ownership Structure, Investment, and Liquidity Constraints: Evidence from German Manufacturing Firms
Posted: 3 Nov 2000
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: Suggested Citation