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Financing Decisions and Corporate Capital Structure in the Later Stages of the German Industrialization

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Author Info
Fohlin, Caroline
Abstract

Information asymmetries and conflicts of interest are theorized to inflate the cost of external finance, but formal bank relationships are thought to ameliorate such problems and may even lead to excessive leverage. Bank oversight is associated with slightly higher leverage but not with greater use of bank debt. Older and cash-rich firms have lower leverage and less bank debt, suggesting that information problems affected firms' financing decisions; but bank attachment appears not to alter these patterns. The findings suggest that bank oversight had little to do with leverage decisions, particularly short-term borrowing, in the later stages of the German industrialization.

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Paper provided by California Institute of Technology, Division of the Humanities and Social Sciences in its series Working Papers with number 1030.

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Length: 43 pages
Date of creation: May 1998
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Publication status: Published:
Handle: RePEc:clt:sswopa:1030

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Postal: Working Paper Assistant, Division of the Humanities and Social Sciences, 228-77, Caltech, Pasadena CA 91125
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