FORM OF OWNERSHIP AND FINANCIAL CONSTRAINTS: PANEL DATA EVIDENCE ON LEVERAGE AND INVESTMENT CHOICES BY ITALIAN FIRMS

This paper analyzes the effect of the forms of ownership on the substitutability between internal and external sources of fmance. In particular, we test whether fmancial constraints are more severe for independent firms and whether there are differences between members of large national business groups and subsidiaries of foreign multinational corporations. The results obtained from leverage and investment equations estimated for a panel ofltalian companies imply that independent firms face greater capitai market imperfections. Members of national groups and subsidiaries of multinational corporations do not dispaly excess sensitivity to cash flow in their investment decisions. The leverage equations suggest however that there are interesting differences between the two latter categories of firms.