The Financing of Investment: Firm Size, Asset Tangibility and the Size of Investment

67 Pages Posted: 3 Aug 2020

Date Written: July 2020

Abstract

How do firms finance their investment? To what extent does the financing mix depends on the nature or the size of investment? To what extent does the funding mix of investment vary along firm size? Relying on a unique database of firms covering 72% of the value added in France over three decades, this paper addresses those questions and provides a comprehensive picture of the financial resources used by firms to finance their investment.

We uncover significant cross-sectional heterogeneity in the financing mix of investment along firm size, asset tangibility and investment size. In particular, we show that the commonly held view that "firms strongly rely on bank credit in a bank-based economy" weakens significantly as we consider larger firms or when it comes to finance intangible investments or relatively small investments.

Keywords: Investment, Working Capital, Firm Financing, Bank Credit, Equity Finance, Retained Earnings, Firm Size, Investment Spikes

JEL Classification: D25; E22; G21; G30; G31; G32

Suggested Citation

LÉ, Mathias and Vinas, Frédéric, The Financing of Investment: Firm Size, Asset Tangibility and the Size of Investment (July 2020). Banque de France Working Paper No. 777, Available at SSRN: https://ssrn.com/abstract=3664080 or http://dx.doi.org/10.2139/ssrn.3664080

Frédéric Vinas

Banque de France ( email )

Paris
France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
63
Abstract Views
371
Rank
513,632
PlumX Metrics