A Further Empirical Investigation of German Firms' Financial Structure and Ensuing Risks

The changes in the financial structures of West German industrial enterprises have been investigated in Größl/Stahlecker/Wohlers (2001). The empirical analysis confirmed the hypothesis that small and medium-sized enterprises are confronted with higher - and even rising - financial risks than larger enterprises. Thresholds were introduced to serve as signals for lenders to tighten credit conditions or even file for bankruptcy. Unfortunately, the empirical distribution of the financial ratios could not be quantified, because the analysis has been - due to reasons of availability - based on aggregate data. The present paper's aim is to check the robustness of the results and to quantify the development of the financial risk measures by using firm-level data that have been the base for the Bundesbank's special evaluation of the balance sheet statistic of West German enterprises. Our results confirm the higher risk position of small and medium-sized enterprises in the period 1987-1996.