Elsevier

Economic Modelling

Volume 9, Issue 3, July 1992, Pages 253-269
Economic Modelling

The financing of corporate firms in France: An econometric model

https://doi.org/10.1016/0264-9993(92)90013-RGet rights and content

Abstract

After a survey of recent developments in the micro- and macroeconomic literature in corporate finance, the paper presents empirical evidence of firms' financing decisions based on a short-term (quarterly) econometric model, fitted on French data for the period 1977–1989. The hierarchy of decisions is the following: first, firms rely on bank borrowing to finance their increased working capital requirements; then, in order to balance their overall indebtedness, they issue equities on the financial market. These results, based on cointegration tests and error correction models, tend to confirm the idea that, in the case of France, the hypothesis of an ‘over draft economy’ (as apposed to ‘financial market economy’) is no longer relevant as far as the financing of firms is concerned. Nevertheless, with the persistence of asymmetric information, financial structure matters; in particular, the debt/equity ratio plays a significat role.

References (28)

  • R.F. Engle et al.

    Forecasting and testing in cointegrated systems

    Journal of Econometrics

    (1987)
  • S.C. Myers et al.

    Corporate financing and investment decisions when firms have information that investors do not have

    Journal of Financial Economics

    (1984)
  • B.S. Bernanke et al.

    Is There a Corporate Debt Crisis?

    Brookings papers on economic activity

    (1988)
  • C. Bordes et al.

    Business debt and default in France

  • M. Boutillier

    Cadre comptable et enchaînements macroéconomiques de la maquette financière du modèle de la Banque de France

    Note SEMEF, 90-36/1

    (15 April 1990)
  • M. Boutillier et al.

    Le taux de crédit accordé aux entreprises françaises: coûts opératoires des banques et prime de risque de défault

    Revue Economique

    (1992)
  • T. Chauveau

    Le modèle financier de la Banque de France, version provisoire

  • T. Chauveau

    Le comportement financier des entreprises

    Revue de l'IPECODE

    (October 1986)
  • R. Courbis

    Le comportement d'autofinancement des entreprises

    Economie Appliquée

    (July–December 1968)
  • J. Davidson et al.

    Econometric modelling of the aggregate time series relationship between consumers' expenditure and income in the United Kingdom

    The Economic Journal

    (1978)
  • E.P. Davis

    Portfolio behaviour of the non-financial private sectors in the major economies

    BIS Economic Papers

    (September 1986)
  • E.P. Davies

    Rising sectoral debt/income ratios: a cause for concern?

    BIS Economics Papers

    (June 1987)
  • D.A. Dickey et al.

    Likelihood ratio statistics for autoregressive time series with a unit root

    Econometrica

    (July 1981)
  • J.M. Facq

    La clientèle-titres des éstablissements de crédit et des agents de change à fin 1986

    Bulletin trimestriel de la Banque de France

    (January 1988)
  • Cited by (7)

    View all citing articles on Scopus
    1

    The authors wish to thank V. Brunhes and E. Emin-Mahé for research assistance, and M. Boutillier for helpful comments. The views expressed here are those of the authors and are not necessarily shared by the Bank of France.

    View full text