Does firm size matter? Evidence on the impact of liquidity constraints on firm investment behavior in Germany

This paper examines the link between liquidity constraints and investment b ehavior for German firms of different sizes from 1970 to 1986. Results indi cate that medium sized firms appear to be more liquidity constrained in the ir investment behavior than either the smallest or largest firms in the stu dy, suggesting that the unique German infrastructure designed to assist the small firm has indeed succeeded in alleviating, to some degree,, such liqu idity constraints. Findings also support the hypothesis that the emerging c ompetition and internationalism which characterized the German financial ma rkets in the 1980s, have been improving access to capital for some groups o f firms. (C) 2002 Elsevier Science B.V. All rights reserved.