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Italian Corporate Governance, Investment, and Finance

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Abstract

Italian industrial structure and financial markets have several distinct features. Italian firms are relatively small, few trade publicly and no corporate bond market exists. The limited types of external funds available to Italian firms makes them prone to financing constraints. We examine a panel containing over 1100 Italian firms. We find that firm size does not appear correlated with the severity of financing constraints. We also find that small firms are frequently mature. Our results suggest that young firms face financing constraints, while mature firms may develop relationships with lenders that lower the costs of external funds. Small, young firms appear to face the tightest financing constraints. Many firms are affiliated with pyramidal business groups. We find that affiliation with pyramidal business groups appears to reduce the effect of financing constraints. Our results have important implications for government policy to promote small firm growth in Italy.

Suggested Citation

  • Robert Carpenter & Laura Rondi, 2000. "Italian Corporate Governance, Investment, and Finance," CERIS Working Paper 200014, Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY -NOW- Research Institute on Sustainable Economic Growth - Moncalieri (TO) ITALY.
  • Handle: RePEc:csc:cerisp:200014
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    Cited by:

    1. Perotti, Enrico C & von Thadden, Ernst-Ludwig, 2003. "The Political Economy of Bank and Equity Dominance," CEPR Discussion Papers 3914, C.E.P.R. Discussion Papers.
    2. Robert Carpenter & Laura Rondi, 2006. "Going Public to Grow? Evidence from a Panel of Italian Firms," Small Business Economics, Springer, pages 387-407.
    3. Fabio Bagliano & Alessandro Sembenelli, 2004. "The cyclical behaviour of inventories: European cross-country evidence from the early 1990s recession," Applied Economics, Taylor & Francis Journals, vol. 36(18), pages 2031-2044.
    4. Domenico Lombardi & Stephen Bond, 2004. "To Buy or Not to Buy? Uncertainty, Irreversibility and Heterogeneous Investment Dynamics in Italian Company Data," IMF Working Papers 04/104, International Monetary Fund.
    5. Chavis, Larry W. & Klapper, Leora F. & Love, Inessa, 2010. "The impact of the business environment on young firm financing," Policy Research Working Paper Series 5322, The World Bank.

    More about this item

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • 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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