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Finance, investment and innovation: A theoretical and empirical comparative analysis

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Abstract

The paper compares the relative efficiency of “country models” in the relationship between finance and investments. Results, confirmed under three different panel data estimates (“Arellano-Bond” GMM method, random and fixed effect estimates) suggest that: i) the UK “thick market” reduces informational asymmetries for large firms and for those firms providing good signals to shareholders; ii) the Japanese “vertical (between firms and banks) integration” and horizontal (among firms) integration” almost eliminates financial constraints (the horizontal integration effect) and equates agency costs across firms (the vertical integration effect). These results are consistent with the “short-termist” hypothesis which assumes that the Japanese economic system can process information more efficiently reducing managerial myopic behaviour and thereby determining positive effects on long term growth.

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Authors and Affiliations

  1. Universita' “Tor Vergata”, Roma, Italy

    Leonardo Becchetti

  2. Linacre College, Oxford University, UK

    Leonardo Becchetti

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  1. Leonardo Becchetti
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Becchetti, L. Finance, investment and innovation: A theoretical and empirical comparative analysis. Empirica 22, 167–184 (1995). https://doi.org/10.1007/BF01384149

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