Working paper/research report

Authors list: Bannier, Christina E.; Grote, Michael H.

Publication year: 2008

URL: https://hdl.handle.net/10419/27872

Title of series: Frankfurt School - Working Paper Series

Number in series: 106

Abstract: 

This paper examines the financing structure of small and medium-sized enterprises (SMEs) in Germany and questions whether an equity gap - or, more generally, a financing gap -exists. Reviewing the literature and available data sources, we find that financing constraints seem to affect, if at all, only a very small subgroup among highly growth-oriented firms. We do not detect any structural problems in average SME's capital structure. Rather, German Mittelstand firms appear to be non-growth oriented and content with their financing decisions. While the relationship-based German banking system helps to minimize the risk of credit rationing, trade credit offers an additional, stable form of liquidity insurance. Highly innovative firms with strong growth potential, on the other hand, do seize the opportunity to tap unconventional means of financing (e.g. mezzanine capital) and appear very successful in doing so.

Harvard Citation style: Bannier, C. and Grote, M. (2008) Equity gap? - which equity gap? On the financing structure of Germany's Mittelstand. (Frankfurt School - Working Paper Series, 106). Frankfurt am Main: Frankfurt School of Finance & Management. https://hdl.handle.net/10419/27872

APA Citation style: Bannier, C., & Grote, M. (2008). Equity gap? - which equity gap? On the financing structure of Germany's Mittelstand. (Frankfurt School - Working Paper Series, 106). Frankfurt School of Finance & Management. https://hdl.handle.net/10419/27872