Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/89559 
Year of Publication: 
2008
Series/Report no.: 
LEM Working Paper Series No. 2008/17
Publisher: 
Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM), Pisa
Abstract: 
We study the relationships between firm financial structure and growth for a large sample of Italian firms (1998-2003). We expand upon existing analyses testing whether liquidity constraints affect firm performance by considering among growth determinants also firm debt structure. Panel regression analyses show that more liquid firms tend to grow more. However, firms do not use their capital to expand, but rather to increase debt. We also find that firm growth is highly fragile as it is positively correlated with non-financial liabilities and it is not sustained by a long-term debt maturity. Finally, quantile regressions suggest that fast-growing firms are characterized by higher growth/cash-flow sensitivities and heavily rely on external debt, but seem to be less bank-backed than the rest of the sample. Overall, our findings suggest that the link between firms' investment and expansion decisions is far more complicated than postulated by standard tests of investment/cash-flow sensitivities.
Subjects: 
Firm growth
Financial structure
Cash flow
Financial constraints
Gibrat law
Quantile regressions
JEL: 
L11
G30
D2
Document Type: 
Working Paper

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