Boundaries, Structures and Strategies
Edited by Andrea Colli and Michelangelo Vasta
Chapter 6: Financing the Largest Manufacturing Firms: Ownership, Equity, and Debt (1936–2001)
6. Financing the largest manufacturing firms: ownership, equity, and debt (1936–2001)* Leandro Conte and Giandomenico Piluso INTRODUCTION 6.1 Economic literature has often highlighted the positive connections that can arise and create a relationship between finance and growth (DemirgüçKunt & Levine, 2001), with regard to both the temporal structure of funding and, more broadly, the type of financing sources of the enterprises’ investments (Nakamura, 1993; Yosha, 1995; Johnson, 1998). It has been observed that the investment strategies in physical capital and human capital depend on the financial structure and on the prevailing model of corporate governance (Rajan & Zingales, 1995). Thus, in the long term, such choices determine the different degree of the competitiveness and the innovation capabilities of the firms. Finally, by extending the criteria of this analysis to a macro-economic level, the different dynamics of the growth of national economic systems have been outlined (Beck et al., 2001). On these topics, the institutional approach has become particularly relevant. This approach, while rejecting the theorem of Modigliani and Miller, focuses the attention on the transaction costs of the several ways in which enterprises collect and invest capital. Hence, it mainly points out the differences that result from the choice of how the capital to fund and manage the business is collected, according to the specific ownership structure and corporate governance. In fact, it can be assumed that investments that can be easily reallocated on the market, are generally funded through the debt capital, and that creditors (principals), when issuing funds,...
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