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The authors study the relationships between firm financial structure and growth for a large sample of Italian firms (1998-2003). They expand upon existing analyses testing whether liquidity constraints affect firm performance by considering among growth determinants also firm debt structure. Panel regression analyses show that more liquid firms tend to grow more. However, firms do not use their capital to expand, but rather to increase debt. They also find that firm growth is highly fragile as it is positively correlated with non-financial liabilities and it is not sustained by a long-term debt maturity. Finally, quintile regressions suggest that fast-growing firms are characterized by higher growth/cash-flow sensitivities and heavily rely on external debt, but seem to be less bank-backed than the rest of the sample.
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