In this paper, using a sample of 1035 Italian manufacturing firms observed in the period 1998–2003, we try to disentangle the different potential determinants underlying the observed positive elasticity between investments and internal resources by accounting for both the ownership structure of the companies and the role played by financial intermediaries as both investors and debt-holders. We found evidence of an inverted U relationship between concentration of ownership and the elasticity of investment to cash flow. Moreover, the analysis shows that the relationship between investment decisions and internal funds is significantly influenced by monitoring efforts played by institutional investors.
Crespi, F., Scellato, G. (2010). Ownership Structure, Internal Financing and Investment Dynamics. MANCHESTER SCHOOL, 78(3), 242-258 [10.1111/j.1467-9957.2009.02134.x].