CORPORATE-FINANCE - STYLIZED FACTS AND TENTATIVE EXPLANATIONS

The paper examines the stylized facts of corporate finance for non-financial enterprises in the G7 countries since 1970. It then juxtaposes these facts against current theories of corporate finance in order to indicate which theories are, and are not, obviously incompatible with the stylized facts. It exploits the fact that there is a reasonably even divide of G7 countries between those that have securities-based and bank-based financial systems to obtain a finer discrimination between competing theories' empirical relevance. No one of the proposed theories gets unequivocal backing from the data. Aspects of different theories may therefore have to be combined to arrive at a good understanding of corporate financial behaviour across countries.