An Examination of the Relationship Between Firm Size, Growth and Liquidity in the Neuer Markt

With the increasing competitive importance of scientific innovations associated with the new economy it has become critical to understand the dynamics of its' firm growth during this early and potentially critical stage of development. This study analyses the relationship between firm size and growth for Neuer Markt firms from its inception in 1997 until 2000 Evidence supports the hypothesis that smaller firms on the Neuer Markt grew faster than larger firms. Further, by using an alternative specification for growth, this study provides evidence that liquidity constraints impact firm growth, even when controlling for firm size and age. Results further indicate that while smaller firms grew faster in the new economy, larger firms grew faster in the old economy, supporting the notion that smaller German firms may be playing a larger role than previously in bringing new technologies to the market place. -- Angesichts der zunehmenden Bedeutung wissenschaftlicher Innovationen , die mit der "neuen Ökonomie" in Verbindung stehen, ist es wichtig geworden, die Wachtumsdynamik dieser Firmen in einem frühen und möglicherweise entscheidenden Entwicklungsstadium zu verstehen. Dieses Papier untersucht für Firmen am Neuen Markt die Beziehung zwischen Größe und Wachstum in der Zeit von 1997 bis 2000. Es gibt Hinweise, dass kleinere Firmen am neuen Markt stärker wachsen als große Unternehmen.. Desweiteren gibt es nach dieser Studie Anzeichen, dass Liquiditätsbeschränkungen das Firmenwachstum beeinflussen, selbst wenn man für Größe und Alter kontrolliert. Weiterhin wird nahegelegt, dass kleine Firmen in der "neuen Ökonomie" schneller als große Firmen wuchsen, während in der "alten Ökonomie" das umgekehrte galt. Dies unterstützt die Vorstellung, dass kleinere deutsche Firmen heute möglicherweise eine größere Rolle als früher spielen, wenn es darum geht, neue Technologien auf den Markt zu bringen.

Shareholder Protection and the Cost of Capital Empirical Evidence from German and Italian Firms

We investigate implications for the cost of capital in a model with agency conflicts between inside and outside shareholders, where the severity of agency costs depends on a parameter representing investor protection. Using firm-level data for Italy and Germany we find significant differences in shareholder protection and its implications for the firm’s ownership structure and the cost of capital. Results indicate that concentrated inside ownership increases the cost of capital for Italian firms while having no significant impact on the cost of capital for German firms. Evidence also suggests bank influence in Germany may serve to reduce investor risk for outside shareholders. In contrast, the magnitude of capital stock distortions is found to be quite important in Italy. Overall, slow growth in continental Europe may be more closely linked to institutional differences in shareholder protection between countries rather than inside ownership of firms.Shareholder protection, ownership structure, cost of capital, agency costs, underinvestment

Finance, Control, and Profitability: The Influence of German Banks

Bank intermediated finance has been cited frequently as the preferred means for channeling funds from savers to firms. Germany is the prototypical economy where universal banks allegedly exert substantial influence over firms. Despite frequent assertions about the considerable power of German banks and the advantages of a bank relation, empirical support is mixed. With a unique dataset and a focus on the fragility/sturdiness of inferences, this paper evaluates German bank influence in terms of three hypotheses: 1) do bank influenced firms enjoy lower finance costs? [No]; 2) is bank influence a solution to control problems? [Yes]; 3) do bank influenced firms have higher profitability? [No]. Coupled with results about the control consequences of concentrated ownership, these results suggest that bank influence serves as a substitute control mechanism, one of several available for addressing corporate control problems.German banks, corporate finance and governance

Agency Issues in a Family Controlled Corporate Governance Structure The Case of Italy

This study provides empirical evidence on the relationship between dividend payout ratios, executive compensation and agency costs in Italy. Corporate governance in Italy is distinguished by the fact that a large number of Italian firms are family controlled, which may theoretically reduce asymmetry of information and associated agency costs. Using a panel of listed manufacturing firms we find evidence that family control plays a significant role in resolving agency issues, i.e. that increases in family control of the firm lead to a higher dividend payout. Nevertheless, as we also find that managerial compensations are negatively related to dividend payout ratios, even in this family controlled environment, dividends do play their role in mitigating agency problems.Corporate Governance, Managerial Compensation, Dividends, Family Firms, Italy

Does firm size matter? Evidence on the impact of liquidity constraint on firm investment behavior in Germany

This paper examines the link between liquidity constraints and investment behavior for German firms of different sizes from 1970 to 1986. Results indicate that medium sized firms appear to be more liquidity constrained in their investment behavior than either the smallest or largest firms in the study, suggesting that the unique German infrastructure designed to assist the small firm has indeed succeeded in alleviating, to some degree, such liquidity constraints. Findings also support the hypothesis that the emerging competition and internationalism which characterized the German financial markets in the 1980's, have been improving access to capital for some groups of firms.Dieser Beitrag untersucht die Beziehung zwischen Liquiditätsbeschränkungen und Investitionsverhalten deutscher Unternehmen unterschiedlicher Größen im Zeitraum 1970 bis 1986. Die Ergebnisse deuten darauf hin, dass das Investitionsverhalten mittlerer Unternehmen stärker von der Liquiditätsseite her beschränkt ist als das der in der Untersuchung berücksichtigten kleinen und großen Unternehmen. Dies spricht dafür, dass die besondere deutsche Infrastruktur, die auf eine Unterstützung kleiner Unternehmen ausgerichtet ist, derartige Liquiditätsbeschränkungen mit Erfolg in gewissem Maße gelockert hat. Die Ergebnisse unterstützen auch die Hypothese, dass der stärkere Wettbewerb und die Internationalisierung, die die deutschen Finanzmärkte in den achtziger Jahren kennzeichneten, einigen Gruppen von Unternehmen den Zugang zu Kapital verbesserten

Executive Compensation and Agency Costs in a Family Controlled Corporate Governance Structure -The Case of Italy

This paper examines whether dividends are an important mechanism for mitigating agency costs in Italy. Corporate governance in Italy is distinguished by the fact that large numbers of firms are family controlled. Examining a panel of listed Italian firms from 2000-2007 we find that dividends play a significant role in mitigating agency costs, as they do in many countries. Empirical findings further suggest that increases in family control lead to a higher dividend payout; while higher levels of executive compensation leads to a lower dividend payout. Overall, findings suggest that executive compensation is effective at mitigating agency costs in the environment where family control over corporate governance is prevalen

Financial factors and investment in Belgium, France, Germany, and the United Kingdom: A comparison using company panel data

We construct company panel data sets for manufacturing firms in Belgium, France, Germany, and the United Kingdom, covering the period 1978-1989. These data sets are used to estimate empirical investment equations, and to investigate the role played by financial factors in each country. A robust finding is that cash flow and profits terms appear to be both statistically and quantitatively more significant in the United Kingdom than in the three continental European countries. This is consistent with the suggestion that financial constraints on investment may be relatively severe in the more market-oriented U.K. financial system

Agency Issues in a Family Controlled Corporate Governance Structure The Case of Italy

WP 06/2011; This study provides empirical evidence on the relationship between dividend payout ratios, executive compensation and agency costs in Italy. Corporate governance in Italy is distinguished by the fact that a large number of Italian firms are family controlled, which may theoretically reduce asymmetry of information and associated agency costs. Using a panel of listed manufacturing firms we find evidence that family control plays a significant role in resolving agency issues, i.e. that increases in family control of the firm lead to a higher dividend payout. Nevertheless, as we also find that managerial compensations are negatively related to dividend payout ratios, even in this family controlled environment, dividends do play their role in mitigating agency problems

Entrepreneurial Motives and Characteristics: An Analysis of Small Restaurant Owners

The purpose of this study was to gain information about the characteristics of small restaurant owners in China. The data for the study were hand-collected by survey questionnaires in four cities across three provinces in China. We found three main results. First, small restaurant entrepreneurs were characterized by one of three distinct motives in that they were autonomy seekers, family protectors, or profit seekers. Second, their funding sources were predominantly private rather than institutional. And third, the entrepreneurial business was the main source of the family’s income. These findings have implications for development programs, financing, and education in developing China’s restaurant industry. This study appears to be the first to investigate empirically entrepreneurial activity among small business owners in the Chinese restaurant industry.Keywords: entrepreneurship, small businesses in China, restaurant industryKeywords: entrepreneurship, small businesses in China, restaurant industr

Financial Factors and Investment in Belgium, France, Germany and the UK:A Comparison Using Company Panel Data

We construct company panel datasets for manufacturing firms in Belgium, France, Germany and the UK, covering the period 1978-89. These datasets are used to estimate a range of empirical investment equations, and to investigate the role played by financial factors in each country. A robust finding is that cash flow or profits terms appear to be both statistically and quantitatively more significant in the UK than in the three continental European countries. This is consistent with the suggestion that financial constraints on investment may be relatively severe in the more market-oriented UK financial system.