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Does Firm Size Matter? Evidence on the Impacts of Liquidity Constraints on Firm Investment Behaviour in Germany

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Author Info
Audretsch, David B
Elston, Julie Ann

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Abstract

This paper examines the link between liquidity constraints and investment behaviour on the one hand, and firm size on the other for a large sample of German firms over the time period 1968-85. The results indicate that smaller firms tend to have investment functions which are more sensitive to liquidity constraints than do the larger enterprises. These results support the hypothesis that smaller firms tend to be disadvantaged relative to their larger counterparts in terms of access to finance. Such liquidity constraints are found to exist in Germany only since the mid-1970s, however. Apparently the German model of finance was able to avoid imposing financial constraints on even smaller enterprises prior to the mid-1970s. Since then, however, the evidence suggests that it has not succeeded in avoiding such liquidity constraints, particularly with respect to the finance of smaller enterprises.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1072.

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Date of creation: Nov 1994
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Handle: RePEc:cpr:ceprdp:1072

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Related research
Keywords: Germany; Investment; Liquidity Constraints;

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Find related papers by JEL classification:
G0 - Financial Economics - - General
G1 - Financial Economics - - General Financial Markets
G2 - Financial Economics - - Financial Institutions and Services
G3 - Financial Economics - - Corporate Finance and Governance
L0 - Industrial Organization - - General

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  1. Christopher F. Baum & Dorothea Schäfer & Oleksandr Talavera, 2006. "The Effects of Short-Term Liabilities on Profitability: A Comparison of German and US Firms," Boston College Working Papers in Economics 636, Boston College Department of Economics, revised 14 Apr 2007. [Downloadable!]
  2. Konstantinos Drakos & Eleftherios Goulas & Christos Kallandranis, 2007. "New vs. used capital investment decisions under liquidity constraints," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 3(1), pages 15-18, January. [Downloadable!] (restricted)
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  6. Pierre M. Picard & David E. Wildasin, 2005. "Labor Market Pooling, Outsourcing and Contracts in Chamberlinian Cities," The School of Economics Discussion Paper Series 0520, Economics, The University of Manchester. [Downloadable!]
  7. Christopher F. Baum & Dorothea Schaefer & Oleksandr Talavera, 2007. "The Effects of Short-Term Liabilities on Profitability: The Case of Germany," Money Macro and Finance (MMF) Research Group Conference 2006 61, Money Macro and Finance Research Group. [Downloadable!]
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  8. PICARD, Pierre M. & WILDASIN, David E., 2006. "Labor market pooling, outsourcing and contracts in Chamberlinian regions," CORE Discussion Papers 2006060, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  9. Richard Hofler & Julie Ann Elston & Junsoo Lee, 2004. "Dividend Policy and Institutional Ownership: Empirical Evidence using a Propensity Score Matching Estimator," Papers on Entrepreneurship, Growth and Public Policy 2004-27, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group. [Downloadable!]
  10. Kritikos, Alexander S. & Kneiding, Christoph & Germelmann, Claas Christian, 2009. "Demand Side Analysis of Microlending Markets in Germany," IZA Discussion Papers 4292, Institute for the Study of Labor (IZA). [Downloadable!]
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  11. Dietmar Harhoff, 1997. "Are There Financing Constraints for R&D and Investment in German Manufacturing Firms?," CIG Working Papers FS IV 97-45, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
    Other versions:
  12. Eleni Angelopoulou & Heather D. Gibson, 2007. "The Balance Sheet Channel of Monetary Policy Transmission: Evidence from the UK," Working Papers 53, Bank of Greece. [Downloadable!]
  13. Block, Jörn & Brockmann, Heiner & Klandt, Heinz & Kohn, Karsten, 2008. "Gründungshemmnisse in Marktmechanismen und Marktumfeld: Facetten empirischer Evidenz
    [Start-up Barriers in Germany: A Review of the Empirical Literature]    ," MPRA Paper 9358, University Library of Munich, Germany. [Downloadable!]
  14. Crespi Francesco & Scellato Giuseppe, 2007. "Ownership Structure, Financial Constraints and Investment Decisions: Evidence from a Panel of Italian Firms," Dipartimento di Economia "S. Cognetti de Martiis" LEI & BRICK - Laboratorio di economia dell'innovazione "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio Carlo 200705, University of Turin. [Downloadable!]
  15. Michael Ehrmann, 2004. "Firm Size and Monetary Policy Transmission – Evidence from German Business Survey Data," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  16. Czarnitzki, Dirk & Binz, Hanna L., 2008. "R&D Investment and Financing Constraints of Small and Medium-Sized Firm," ZEW Discussion Papers 08-047, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  17. Yuji Honjo & Nobuyuki Harada, 2006. "SME Policy, Financial Structure and Firm Growth: Evidence From Japan," Small Business Economics, Springer, vol. 27(4), pages 289-300, December. [Downloadable!] (restricted)
  18. Emmanuel Duguet & Stéphanie Monjon, 2004. "Is innovation persistent at the firm Level . An econometric examination comparing the propensity score and regression methods," Cahiers de la Maison des Sciences Economiques v04075, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
  19. Tuomas A. Peltonen & Ricardo M. Sousa & Isabel S. Vansteenkiste, 2009. "Asset prices, Credit and Investment in Emerging Markets," NIPE Working Papers 18/2009, NIPE - Universidade do Minho. [Downloadable!]
  20. Alex Coad, 2007. "Neoclassical vs evolutionary theories of financial constraints : critique and prospectus," Documents de travail du Centre d'Economie de la Sorbonne r07008, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne. [Downloadable!]
  21. Centre for the Study of Living Standards, 2005. "What Explains the Canada-US ICT Investment Intensity Gap?," CSLS Research Reports 2005-06, Centre for the Study of Living Standards. [Downloadable!]
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