A Cross-country Study of Corporate Financial Structure and the Flexibility Issue
AbstractFirms need flexibility, defined as the capacity to react to unexpected situations. Corporate flexibility improves with liquidity. For non-financial firms, sources of liquidity are twofold: internal, by keeping cash, and external, through a borrowing power, usually from banks. On the average, a high rate of cash testifies to a lack of mutual trust between bank and firm, typical of a 'procedure-based' banking model and a 'Exit-dominated' financial system (versus a 'Voice-dominated' one). Data Analysis supports the view that cash balance is an indicator of corporate financial pattern which should be taken into account to characterize national financial systems. This article brings a new perspective to the analysis of financial system differences by focusing on corporate liquidity.
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Bibliographic InfoArticle provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.
Volume (Year): 221 (2001)
Issue (Month): 5-6 ()
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Flexibility; liquidity; short-term loan; overdraft; cash balance; international comparison;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
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