Template-type: ReDIF-Paper 1.0
Author-Name: Crespi, Francesco
Author-Email: francesco.crespi@uniroma3.it
Author-Name: Scellato, Giuseppe
Author-Email: giuseppe.scellato@polito.it
Author-Workplace-Name: University of Turin
Author-Workplace-Homepage: http://www.est.unito.it/
Title: Ownership Structure, Financial Constraints and Investment Decisions: Evidence from a Panel of Italian Firms
Abstract:Over the part two decades, a wide empirical literature has addressed the theme of firmtevel financial 
constraints, supporting the hypothesis that the availability of internal funds is indeed a major driver of 
investment decisions (Hímmeiberg and Petersen, 1994). The largest part of such empirical analyses is based on 
refinements of the original model by Fazzari, Hubbard and Petersen (1988) which derives the presente of liquidìty 
constraints from the observation of differentials in Investment-cash flow elastìcities among sub groups of companíes. 
However, the theoretical ride of the issue is stili debated. Following Iladlock (1998) and Degryse and de jong 
(2006), investment  -  cash flow sensitivities can be attributed to the presente of two different factors: asymmetric 
information on capital markets or internal agency problems leading to overinvestment by the management. 
In this paper, we try to disentangle the different potential determinante underlving the observed positive 
elasticity between investments and internal  resources using a new sample of 1035 Italian manufacturing firms 
observed in the period 1998-2003. In order to analyse to what extent investment elasticity míght be related to 
agency problems, we account for both the ownership strutture of the companies and the role played by financial 
intermediaries as both investors and debt-holders. The most interesting result emerging from our analysis is 
related to the presente of an inverted - U relatìonship between concentration of ownership and the elasticity of 
investment to cashflow. The overall evidente, which includer analysis accounting for innovation effort and for the 
effect of industrial group membership, is supportive of the hypothesîs that the elevated dependance of investment 
in both tangible and intangible capital on internal  resources cannot be fully attributed to frictions on the 
credit market.
Length: 26 pages
Creation-Date: 2007-03
File-URL: http://www.est.unito.it/do/home.pl/Download?doc=/allegati_wp/wp2007dip_l_b/5_wp_momigliano.pdf
File-Format: Application/PDF
Handle: RePEc:uto:labeco:200705