Conclusions

Abstract

Our econometric analysis provides the clear picture of a significant portion (one-third, numerically across the surveyed years; 0.75 % of Italian GDP in 2006, in terms of total value added) of the Italian manufacturing sector which, although it could potentially serve as the driver of the re-launch of the country’s economy, is financially myopic and operationally stagnant. Our suggestion is that a rejuvenation of business operations of such mature enterprises should start from a change in their financial strategy. To some extent, the role of family shareholders could be taken over by private equity funds with a greater, active involvement and better incentives. A (partial) re-allocation of firms’ ownership in favor of private equity investors (based on a qualitative change to the gearing ratio, G) would permit to create more value (from growth, G) via improvement of governance (G) style and management practices. Our unique survey-based evidence reinforces our claim that those Italian manufacturing firms only backed by internal equity financing, as portrayed by our econometric analysis, may become the real targets of the country’s private equity activity.