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Does Firm Size Matter? Evidence on the Impacts of Liquidity Constraints on Firm Investment Behaviour in Germany

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  • Audretsch, David B
  • Elston, Julie Ann

Abstract

This paper examines the link between liquidity constraints and investment behaviour on the one hand, and firm size on the other for a large sample of German firms over the time period 1968-85. The results indicate that smaller firms tend to have investment functions which are more sensitive to liquidity constraints than do the larger enterprises. These results support the hypothesis that smaller firms tend to be disadvantaged relative to their larger counterparts in terms of access to finance. Such liquidity constraints are found to exist in Germany only since the mid-1970s, however. Apparently the German model of finance was able to avoid imposing financial constraints on even smaller enterprises prior to the mid-1970s. Since then, however, the evidence suggests that it has not succeeded in avoiding such liquidity constraints, particularly with respect to the finance of smaller enterprises.

Suggested Citation

  • Audretsch, David B & Elston, Julie Ann, 1994. "Does Firm Size Matter? Evidence on the Impacts of Liquidity Constraints on Firm Investment Behaviour in Germany," CEPR Discussion Papers 1072, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1072
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    JEL classification:

    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • L0 - Industrial Organization - - General

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