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Financial Structure and Corporate Growth: Evidence from Italian Panel Data

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  • Massimo Molinari
  • Silvia Giannangeli
  • Giorgio Fagiolo

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.
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  • Massimo Molinari & Silvia Giannangeli & Giorgio Fagiolo, 2016. "Financial Structure and Corporate Growth: Evidence from Italian Panel Data," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 45(3), pages 303-325, November.
    • Handle: RePEc:bla:ecnote:v:45:y:2016:i:3:p:303-325
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    File URL: http://hdl.handle.net/10.1111/ecno.12059
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    3. Ivan Miroshnychenko & Stefano Bozzi & Roberto Barontini, 2019. "Firm Growth and Legal Environment," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 48(1), February.
    4. Sorin Gabriel ANTON, 2016. "The Impact Of Leverage On Firm Growth. Empirical Evidence From Romanian Listed Firms," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 18, pages 147-158, December.
    5. Antonio Accetturo & Giulia Canzian & Michele Cascarano & Maria Lucia Stefani, 2019. "Debt maturity and firm performance: evidence from a quasi-natural experiment," Temi di discussione (Economic working papers) 1250, Bank of Italy, Economic Research and International Relations Area.
    6. Cattaruzzo, Sebastiano & Teruel, Mercedes, 2022. "On the heterogeneity of the long-term leverage-growth relationship: A cross-country analysis of manufacturing firms," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 552-565.
    7. Patrycja Grinberger & Natalia Nehrebecka, 2015. "Determinants of firm’s growth: empirical study of Polish listed companies," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 43.

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