Following the idea that adverse macroeconomic shocks to the economy worsen agency problems between borrowers and lenders, this paper presents empirical evidence that small and large firms react differently to monetary tightening. We use aggregate annual balance sheet data for two subsamples of large and small private Italian companies over the period 1968-1991. Based upon qualitative and quantitative descriptive evidence, we first construct stringency dummies that capture periods of monetary tightness. We then provide descriptive evidence that, following a restriction, small firms report a sharper decrease in short-term dept and a steeper fall in both sales and inventory. Finally, inventory and fixed investment equations are estimated in an ECM form. Consistently with our expectations, we find that both inventory and fixed investment decisions by small firms display greater sensitivity to proxies of credit worthiness, the more so during periods of monetary tightening.