Financial Structure and Vulnerability for the Firms of the Furnishing District

The aim of this paper is to analyse the impact of the investment and financial strategies on the development of the firms of the furniture manufacturing district located between the regions of Puglia and Basilicata in Southern Italy. This district has moved over a period of ten years from a phase of maximum growth to a phase of maturity and then crisis. In the furniture district, the excess of financial debt has been crucial: the high level of borrowing, together with a decrease in operative margin and with huge unprofitable investments, has affected the firms' economical and financial balance. After having reviewed the most significant factors of change for the firms of the district happened in the last decade, the analysis of the balance sheets of the main seven firms has shown how the excess of debt has hampered and in some cases even compromised the future firm development. This paper highlights that, if in the periods of great expansion with high economic revenues, the financial model adopted by the firms of the district, reluctant to the use of risk capital, could be considered sustainable, in the present economic scenario, characterised by increased competitive pressures, significant changes in the macroeconomic international environment as well as a more rigid regulation on the credit market, this model is no longer acceptable. The case study suggests that firms should be more focused on the search for a balanced financial structure in order to pursue a durable development path and to face the decrease in the economic margins. In addition, the new requirements of the bank system, following the introduction of Basilea 1 and Basilea 2, should lead firms to reduce the leverage in order to maintain a good bank reputation.