Banks, related variety and firms’ investments

Roberto Antonietti, Giulio Cainelli, Monica Ferrari () and Stefania Tomasini ()

Letters in Spatial and Resource Sciences, 2015, vol. 8, issue 1, 89-99

Abstract: In this paper, we study whether related variety affects firms’ fixed investment behaviour, and whether this relationship is linked also to the operational and organizational proximity between banks and local economies. By estimating different specifications of a dynamic investment equation on an unbalanced panel of Italian manufacturing firms for the period 2000–2007, we find that related variety boosts fixed investments by lowering their sensitivity to cash flow. This occurs because in technologically related areas banks benefit from lower screening and monitoring costs, easier re-allocation of property rights, and higher likelihood of establishing extended credit relationships with firms. However, we find also that the positive effect of related variety on investments disappears as the functional distance between local branches and their headquarters increases: more hierarchical and less embedded banks find it more difficult to collect tacit information on inter-firm production and financial linkages at the local level and therefore reduce credit provision. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: Error correction model; Fixed investments; Functional distance; Operational proximity; Related variety; G21; G34; L60; O12; R51 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1007/s12076-014-0130-2 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:lsprsc:v:8:y:2015:i:1:p:89-99

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/12076

DOI: 10.1007/s12076-014-0130-2

Access Statistics for this article

Letters in Spatial and Resource Sciences is currently edited by Henk Folmer and Amitrajeet A. Batabyal

More articles in Letters in Spatial and Resource Sciences from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().