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Firms’ Financial Structure And Real Decisions: A Critical Survey Of The Empirical Literature

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Abstract

Theoretical literature suggests that firms’ financial structure affects their real decisions because of capital markets imperfections. Several empirical studies have been conducted to test this hypothesis. This survey illustrates the main results of this literature focusing on the effects of capital markets imperfections on firms’ real decisions: fixed capital investments, R&D investments, inventory investments, labour demand and profit margins determination. Unlike previous surveys on this topic, this paper includes empirical evidence on Italian firms and discusses recent contributions supporting the “managerial discretion theory” as an alternative explanation of the positive relationship between investments and financial variabiles.

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  • Anna Bottasso, 1996. "Firms’ Financial Structure And Real Decisions: A Critical Survey Of The Empirical Literature," CERIS Working Paper 199623, CNR-IRCrES Research Institute on Sustainable Economic Growth - Torino (TO) ITALY - former Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY.
    • Handle: RePEc:csc:cerisp:199623
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    Keywords

    Firms;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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