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Financial structure and Southern Italy firms’ growth

Author

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  • Domenico Sarno

Abstract

This paper shows that the growth of firms in the Southern Italian (Mezzogiorno) regions is financed mostly by internal sources, since external financing is more problematic and costly. Hence firm growth is subject to financial constraints. The “financial growth cycle” these are used to analyse the features of the capital structure of the Mezzogiorno’s SMEs compared to Italy-wide SMEs. Then, within the framework proposed by financial constraints literature, the capital structure related to the growth is analysed. In order to estimate the growth-cash flow relationship the empirical Gibrat growth model enriched with the cash flow variable is used.

Suggested Citation

  • Domenico Sarno, 2007. "Financial structure and Southern Italy firms’ growth," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 2, May.
    • Handle: RePEc:rar:journl:0054
    as

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    File URL: http://www.francoangeli.it/riviste/Scheda_Riviste.asp?IDArticolo=31103&Tipo=ArticoloPDF
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    References listed on IDEAS

    as
    1. Hubbard, R Glenn & Kashyap, Anil K & Whited, Toni M, 1995. "International Finance and Firm Investment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 683-701, August.
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    3. Audretsch, David B. & Elston, Julie Ann, 2002. "Does firm size matter? Evidence on the impact of liquidity constraints on firm investment behavior in Germany," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 1-17, January.
    4. Domenico Sarno, 2005. "Liquidity Constraint on the Production of Firms in Southern Italy," Small Business Economics, Springer, vol. 25(2), pages 133-146, September.
    5. Becchetti, Leonardo & Trovato, Giovanni, 2002. "The Determinants of Growth for Small and Medium Sized Firms: The Role of the Availability of External Finance," Small Business Economics, Springer, vol. 19(4), pages 291-306, December.
    6. Angelini, P. & Di Salvo, R. & Ferri, G., 1998. "Availability and cost of credit for small businesses: Customer relationships and credit cooperatives," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 925-954, August.
    7. Cressy, Robert & Olofsson, Christer, 1997. "European SME Financing: An Overview," Small Business Economics, Springer, vol. 9(2), pages 87-96, April.
    8. Saltari, Enrico & Travaglini, Giuseppe, 2001. "Financial Constraints and Investment Decisions," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(3), pages 330-344, August.
    9. Audretsch, David B. & Elston, Julie Ann, 2002. "Does firm size matter? Evidence on the impact of liquidity constraints on firm investment behavior in Germany," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 1-17, January.
    10. Audretsch, David B & Elston, Julie A, 1997. "Financing the German Mittelstand," Small Business Economics, Springer, vol. 9(2), pages 97-110, April.
    11. Calcagnini, Giorgio & Iacobucci, Donato, 1997. "Small Firm Investment and Financing Decisions: An Option Value Approach," Small Business Economics, Springer, vol. 9(6), pages 491-502, December.
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    More about this item

    Keywords

    Financial Constraints; Firm Growth; Capital Structure;

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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