Corporate Financing in Canada

In this paper we build on recent empirical work and investigate the sources of finance for physical investment in Canada. We provide a set of data on the patterns of finance to enable consistent international comparisons and use two methods of measuring financing patterns (both using flow-of-funds data based on the national income accounts)-the net flows approach of Corbett and Jenkinson (1996, 1997) and the gross flows approach of Hackethal and Schmidt (2003). We find evidence to support the view that internal finance is the dominant mode of finance and that the pattern of finance in Canada is very similar to financing patterns in other countries, consistent with the findings by Mayer (1990) and Corbett and Jenkinson (1997).