Form of Ownership and Financial Constraints

44 Pages Posted: 20 Apr 2016

See all articles by Fabio Schiantarelli

Fabio Schiantarelli

Boston College - Department of Economics; IZA Institute of Labor Economics

Alessandro Sembenelli

University of Turin - Department of Economics and Financial Sciences G. Prato

Date Written: July 1996

Abstract

The authors analyze whether form of ownership affects the substitutability of internal and external sources of finance. In particular, they test whether financial constraints are more severe for independent firms, and whether members of large national business groups suffer different constraints than subsidiaries of foreign multinational corporations. The results for leverage and investment equations estimated for a panel of Italian companies suggest that: a) independent firms face more severe financial constraints than other firms do; and b) members of national groups and subsidiaries of multinational corporations are not oversensitive to cash flow in their investment decisions. But leverage equations suggest interesting differences between the two groups. In particular, agency costs arising from the conflict between managers and shareholders are more important for subsidiaries of multinational corporations.

Suggested Citation

Schiantarelli, Fabio and Sembenelli, Alessandro, Form of Ownership and Financial Constraints (July 1996). Available at SSRN: https://ssrn.com/abstract=636110

Fabio Schiantarelli (Contact Author)

Boston College - Department of Economics ( email )

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HOME PAGE: http://https://sites.google.com/a/bc.edu/fabio-schiantarelli/

IZA Institute of Labor Economics

P.O. Box 7240
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Germany

Alessandro Sembenelli

University of Turin - Department of Economics and Financial Sciences G. Prato ( email )

C. so Unione Sovietica, 218 Bis
Torino, 13820-4020
Italy
+39 011 670 6059 (Phone)
+39 011 670 6062 (Fax)

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