Abstract

The aim of this paper is to show that in the Southern regions of the Italian "Mezzogiorno", where financial markets are not properly developed, the growth of enterprises is more dependent - compared to enterprises of other Italian regions - on internal finance. Therefore, there is a connection between the degree of development of financial system and the industrial structure; this could explain the high degree of specialisation of the "Mezzogiorno" industry in traditional sectors. In order to verify growth sensitivity towards internal finance, we use the empirical model proposed by the Gibrat law, in which we introduce, in this case, a variable representing internal finance. This model allows us to measure the different contribution to cash flow growth in Southern Italian enterprises, compared to that of other Italian regions enterprises. Finally, we verify if there is a relationship between the industrial composition emerging from this analysis and the composition of Southern manufacturing industry specialisation, and if this relationship is robust.