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Financial Constraints and Continental Business Groups: Evidence from German Konzerns

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  • Dorothea Schäfer
  • Yuriy Gorodnichenko
  • Oleksandr Talavera

Abstract

Using a unique, large panel of German firms, we examine whether participation in business groups reduces the sensitivity of investment to cash flow. The main finding is that the reduction in the sensitivity is small for small firms and negligible for medium and large firms. We argue that by virtue of the continental business model, gains from business groups should be in better contract enforcement and coordination rather than in internalizing capital markets.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.44440.de/dp590.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 590.

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Length: 16 p.
Date of creation: 2006
Date of revision:
Handle: RePEc:diw:diwwpp:dp590

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Keywords: concern; business group; investment; liquidity constraints.;

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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.
  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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