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Estimating the Borrowing Behavior of French and German Firms. An Econometric Analysis / Verschuldungsverhalten französischer und deutscher Unternehmen. Eine ökonometrische Analyse

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  • Kremp Elizabeth

    (Ministère de L’Economie des Finances et de l’lndustrie, Service des Etudes et des Statistiques, Industrielles (SESSI, DIGITIP), 20 avenue de Ségur, F-75353 Paris 07 SP, France)

  • Stöß Elmar

    (Deutsche Bundesbank, P.O.B.IO 06 02, D-60006 Frankfurt/Main)

Abstract

This paper investigates the borrowing behavior of 2,900 French and 1,300 German firms over the 1987-95 period. Both samples based on data sets of the Banque de France and the Deutsche Bundesbank not only include large but also small and medium-sized enterprises. Applying GMM techniques, we estimate identical debt equations for the two total samples and by size class. Despite the large differences between the two countries in term of debt trends over time and size class the main result is the similarity of a few determinants between France and Germany. E.g. we find that firm growth has a positive impact on borrowing according to the theory of signalling whereas the negative correlation of profit and debt supports pecking order approach and the cost of finance has a negative impact on leverage, too. Additionally, the study can provide some insights for the monetary transmission mechanism in both EMU member countries.

Suggested Citation

  • Kremp Elizabeth & Stöß Elmar, 2001. "Estimating the Borrowing Behavior of French and German Firms. An Econometric Analysis / Verschuldungsverhalten französischer und deutscher Unternehmen. Eine ökonometrische Analyse," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 221(5-6), pages 620-647, October.
    • Handle: RePEc:jns:jbstat:v:221:y:2001:i:5-6:p:620-647
    DOI: 10.1515/jbnst-2001-5-610
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