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Financial constraints and continental business groups: Evidence from German Konzerns

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  • Gorodnichenko, Yuriy
  • Schaefer, Dorothea
  • Talavera, Oleksandr

Abstract

Using a unique large panel of German firms, we examine whether participation in business groups (Konzerns) reduces the sensitivity of investment to cash flow. The main finding is that the investment sensitivity is significantly reduced for small firms. On the other hand, we do not find clear evidence that medium-sized and large firms participating in Konzerns have different sensitivity compared to that of their stand-alone counterparts. We conclude that the German business model, which embodies key elements of the continental business model, seems to alleviate capital market imperfections for medium-sized and large firms and fails to do so for small firms.

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Bibliographic Info

Article provided by Elsevier in its journal Research in International Business and Finance.

Volume (Year): 23 (2009)
Issue (Month): 3 (September)
Pages: 233-242

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Handle: RePEc:eee:riibaf:v:23:y:2009:i:3:p:233-242

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Web page: http://www.elsevier.com/locate/ribaf

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Keywords: Concern Business group Investment Liquidity constraints;

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References

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Cited by:
  1. Anaïs HAMELIN, 2013. "Does Size Matter? Firm And Business Group Size Influence On The Benefits Of Group Affiliation," Working Papers of LaRGE Research Center 2013-10, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg (France).
  2. Anaïs Hamelin, 2010. "Is there tunneling in Small Business Groups? Evidence from French SMEs," Working Papers CEB 10-003.RS, ULB -- Universite Libre de Bruxelles.

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