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Does firm size matter? Evidence on the impact of liquidity constraint on firm investment behavior in Germany

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  • Audretsch, David B.
  • Elston, Julie Ann

Abstract

This paper examines the link between liquidity constraints and investment behavior for German firms of different sizes from 1970 to 1986. Results indicate that medium sized firms appear to be more liquidity constrained in their investment behavior than either the smallest or largest firms in the study, suggesting that the unique German infrastructure designed to assist the small firm has indeed succeeded in alleviating, to some degree, such liquidity constraints. Findings also support the hypothesis that the emerging competition and internationalism which characterized the German financial markets in the 1980?s, have been improving access to capital for some groups of firms. -- Dieser Beitrag untersucht die Beziehung zwischen Liquiditätsbeschränkungen und Investitionsverhalten deutscher Unternehmen unterschiedlicher Größen im Zeitraum 1970 bis 1986. Die Ergebnisse deuten darauf hin, dass das Investitionsverhalten mittlerer Unternehmen stärker von der Liquiditätsseite her beschränkt ist als das der in der Untersuchung berücksichtigten kleinen und großen Unternehmen. Dies spricht dafür, dass die besondere deutsche Infrastruktur, die auf eine Unterstützung kleiner Unternehmen ausgerichtet ist, derartige Liquiditätsbeschränkungen mit Erfolg in gewissem Maße gelockert hat. Die Ergebnisse unterstützen auch die Hypothese, dass der stärkere Wettbewerb und die Internationalisierung, die die deutschen Finanzmärkte in den achtziger Jahren kennzeichneten, einigen Gruppen von Unternehmen den Zugang zu Kapital verbesserten.

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Bibliographic Info

Paper provided by Hamburg Institute of International Economics (HWWA) in its series HWWA Discussion Papers with number 113.

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Date of creation: 2000
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Handle: RePEc:zbw:hwwadp:26306

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  1. Elston, J-A, 1997. "Investment, Liquidity Constaints and Bank Relationships : Evidence from German Manufacturing Firms," Papers, American Institute for Contemporary German Studies- 17, American Institute for Contemporary German Studies-.
  2. William C. Brainard & James Tobin, 1968. "Pitfalls in Financial Model-Building," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 244, Cowles Foundation for Research in Economics, Yale University.
  3. Elston, Julie, 1997. "A Comparison of Empirical Investment Equations using Company Panel Data for France, Germany, Belgium and the UK," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 981, California Institute of Technology, Division of the Humanities and Social Sciences.
  4. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 1(1), pages 15-29, February.
  5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, American Economic Association, vol. 71(3), pages 393-410, June.
  6. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(4), pages 808-27, August.
  7. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(4), pages 689-721, August.
  8. Jaffee, Dwight M & Russell, Thomas, 1976. "Imperfect Information, Uncertainty, and Credit Rationing," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 90(4), pages 651-66, November.
  9. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
  10. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(3), pages 488-500, August.
  11. Corbett, Jennifer & Jenkinson, Tim, 1994. "The Financing of Industry, 1970-89: An International Comparison," CEPR Discussion Papers, C.E.P.R. Discussion Papers 948, C.E.P.R. Discussion Papers.
  12. Cable, John R, 1985. "Capital Market Information and Industrial Performance: The Role of West German Banks," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 95(377), pages 118-32, March.
  13. Robert S. Chirinko, 1993. "Business fixed investment spending: a critical survey of modeling strategies, empirical results, and policy implications," Research Working Paper, Federal Reserve Bank of Kansas City 93-01, Federal Reserve Bank of Kansas City.
  14. Chirinko, Robert S, 1993. "Business Fixed Investment Spending: Modeling Strategies, Empirical Results, and Policy Implications," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1875-1911, December.
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