Globalization: A New Role for Developing Countries in an Integrating World

72 Pages Posted: 20 Apr 2016

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

Ohtsubo, Shigeru, Globalization: A New Role for Developing Countries in an Integrating World (July 1996). World Bank Policy Research Working Paper No. 1628. Available at SSRN: https://ssrn.com/abstract=636111

Shigeru Ohtsubo (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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