Financial Constraints and Economic Behaviour: A Study of the Specific Features of French Small and Medium-Sized Manufacturing Firms from 1985 to 1995

Abstract

The aim of this paper is to give an overwiev of the behavior of manufacturing firms, in particular the small ones and to go deeper into the conclusion of a previous paper (Equity and rate of return, ewp-fin-9608001 and 40th International Council of Small Business, Sydney, June 1996). After some quotes about capital structure and private firms, a comparison of own funds is made between german, french, spanish, italian and austrian manufacturing firms. We can find that french manufacturing firms, for each size studied, are less indebted than their foreign counterparts. Otherwise, french small firms are more profitable and more efficient than the larger ones. We then point out two economic behaviors. The first one depends on growth capacity of the firms and also on their accumulation outlay; the second depends on the intensity of the links with the financial markets, the facilities to obtain lendable funds, all aspects which oblige firms to make high financial profitabilities that can reduce accumulation decisions.

Keywords: economic behavior, financial constraint, SME, equity

JEL Classification: G31, G32