Internal Capital Markets, Bank Borrowing and Investment: Evidence from German Corporate Groups

摘要: Large German corporations are often suspected to be isolated from organized external capital markets and instead rely on sources within the corporate group or closely connected universal banks. This paper firstly reviews discusses benefits costs of financing through internal close bank relationships. The theoretical analysis shows that there is no clear preference regarding relative pros cons such borrowing. Secondly, empirically investigates joint effects borrowing cash flow dependence investment (investment-cash sensitivity) which used identify firms with constraints. For a sample 220 groups, empirical evidence found investment-cash sensitivity for heavily using higher than relying more sensitivities vary greatly depending degree market activity intensity. directly in contrast existing documenting have lower tendency. It suggested separating samples into gives unambiguous prediction because latter form might stem relationship has similar characteristics like an market. Furthermore, descriptive high suggests not all these companies appear financially constrained. supports recent research claims useful measure