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Financial Constraints and Continental Business Groups: Evidence from German Konzerns

Dorothea Schäfer, Yuriy Gorodnichenko and Oleksandr Talavera ()

No 590, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Using a unique, large panel of German firms, we examine whether participation in business groups reduces the sensitivity of investment to cash flow. The main finding is that the reduction in the sensitivity is small for small firms and negligible for medium and large firms. We argue that by virtue of the continental business model, gains from business groups should be in better contract enforcement and coordination rather than in internalizing capital markets.

Keywords: concern; business group; investment; liquidity constraints. (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Pages: 16 p.
Date: 2006
New Economics Papers: this item is included in nep-eec, nep-eff, nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Financial constraints and continental business groups: Evidence from German Konzerns (2009) Downloads
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