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The Financing of Investment: Firm Size, Asset Tangibility and the Size of Investment

Mathias Lé () and Frederic Vinas

Working papers from Banque de France

Abstract: How do firms finance their investment? To what extent does the financing mix depends on the nature or the size of investment? To what extent does the funding mix of investment vary along firm size? Relying on a unique database of firms covering 72% of the value added in France over three decades, this paper addresses those questions and provides a comprehensive picture of the financial resources used by firms to finance their investment. We uncover significant cross-sectional heterogeneity in the financing mix of investment along firm size, asset tangibility and investment size. In particular, we show that the commonly held view that "firms strongly rely on bank credit in a bank-based economy" weakens significantly as we consider larger firms or when it comes to finance intangible investments or relatively small investments.

Keywords: Investment; Working Capital; Firm Financing; Bank Credit; Equity Finance; Retained Earnings; Firm Size; Investment Spikes . (search for similar items in EconPapers)
JEL-codes: D25 E22 G21 G30 G31 G32 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2020
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn, nep-eur, nep-mac and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:777

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