Internal Funding and Investment: Analysis by Corporate Size Based on Financial Statements Statistics of Corporations by Industry

This paper conducted an empirical analysis on investment fs relationship with internal funding and with external funding costs that differ depending on corporate size, using survey slip data for Financial Statements Statistics of Corporations by Industry covering from small to large enterprises. The analysis confirmed a U - shaped relationship between investment and internal funding, meeting the results of earlier empirical studies using US and UK corporate data. Meanwhile, the estimation results of the investment function confirmed a fixed effect in which smaller enterprises invest more when internal funding is positive, conflicting with a traditional theory that smaller enterprises hold down investment due to stronger exogenous liquidity constraints. The analysis also found that information such as the short - term loan share and negative net worth has a statistically significant effect on investment and that there is a close relationship between the magnitude of the effect and enterprise size. The finding indicates that the identification of excellent borrowers in the capital market is important for explaining external funding cost gaps between enterprises.