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Dependence on external finance: an inherent industry characteristic?

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Author Info
von Kalckreuth, Ulf
von Furstenberg, George M.

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Abstract

Rajan and Zingales (1998) use U.S. Compustat firm data for the 1980s to obtain measures of manufacturing sectors? Dependence on External Finance (DEF). They take any differences in these measures to be structural/technological and thus applicable to other countries. Their joint assumptions about how to obtain representative values of DEF by sector and about why these values differ fundamentally between sectors have been adopted in additional studies seeking to show that sectors benefit unequally from a country?s level of financial development. However, the assumptions as such have not been examined. The present study, conducted with cyclically adjusted annual measures of DEF derived from U.S. industry data for 1977-1997, attempts to do so using data that are aggregated by sector. We find that those variables that may be regarded as structural/ technological have very low explanatory power, and that the DEF figures calculated from micro data do not correspond closely to what is obtained from aggregate figures. Hence key assumptions on which RZ's argumentation is based could not be validated. --

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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2006,30.

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Date of creation: 2006
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Handle: RePEc:zbw:bubdp1:4792

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Related research
Keywords: Growth and finance; financial development; industry structure;

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Find related papers by JEL classification:
G20 - Financial Economics - - Financial Institutions and Services - - - General
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
G30 - Financial Economics - - Corporate Finance and Governance - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rene M. Stulz, 2005. "The Limits of Financial Globalization," NBER Working Papers 11070, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Kovenock, Dan & Phillips, Gordon M, 1997. "Capital Structure and Product Market Behavior: An Examination of Plant Exit and Investment Decisions," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 10(3), pages 767-803.
    Other versions:
  3. Bruno Tissot & Les Skoczylas, 2005. "Revisiting recent productivity developments across OECD countries," BIS Working Papers 182, Bank for International Settlements. [Downloadable!]
  4. Stulz, Rene M., 2005. "The Limits of Financial Globalization," Working Paper Series 2005-1, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  5. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June. [Downloadable!] (restricted)
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  6. William R. Hauk & Romain Wacziarg, 2004. "A Monte Carlo Study of Growth Regressions," NBER Technical Working Papers 0296, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Luigi Guiso & Tullio Jappelli & Mario Padula & Marco Pagano, 2004. "Financial Market Integration and Economic Growth in the EU," CSEF Working Papers 118, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
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  8. Beck, Thorsten & Levine, Ross, 2001. "Stock markets, banks, and growth : correlation or causality?," Policy Research Working Paper Series 2670, The World Bank. [Downloadable!]
  9. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Berger, Allen N. & Udell, Gregory F., 2006. "A more complete conceptual framework for SME finance," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2945-2966, November. [Downloadable!] (restricted)
  11. Hali J. Edison & Ross Levine & Luca Antonio Ricci & Torsten Sløk, 2002. "International Financial Integration and Economic Growth," IMF Working Papers 02/145, International Monetary Fund. [Downloadable!]
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  12. Thomas Barnebeck Andersen & Finn Tarp, 2003. "Financial liberalization, financial development and economic growth in LDCs," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(2), pages 189-209. [Downloadable!]
  13. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "Does Local Financial Development Matter?," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 929-969, August. [Downloadable!] (restricted)
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  14. Nicola Cetorelli & Philip E. Strahan, 2006. "Finance as a Barrier to Entry: Bank Competition and Industry Structure in Local U.S. Markets," Journal of Finance, American Finance Association, vol. 61(1), pages 437-461, 02. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Anna Ilyina & Roberto M. Samaniego, 2008. "Technology and Finance," IMF Working Papers 08/182, International Monetary Fund. [Downloadable!]
  2. Beck, Thorsten, 2008. "The econometrics of finance and growth," Policy Research Working Paper Series 4608, The World Bank. [Downloadable!]
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