Abstract-We construct company panel data sets for manufacturing firms in Belgium, France, Germany, and the United Kingdom, covering the period [1978][1979][1980][1981][1982][1983][1984][1985][1986][1987][1988][1989]. These data sets are used to estimate empirical investment equations, and to investigate the role played by financial factors in each country. A robust finding is that cash flow and profits terms appear to be both statistically and quantitatively more significant in the United Kingdom than in the three continental European countries. This is consistent with the suggestion that financial constraints on investment may be relatively severe in the more market-oriented U.K. financial system.

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We are grateful to the late Robert Eisner, Steve Bond and two referees for helpful comments on earlier versions of this paper. The reader of this paper will see that out "modern" ("vingt ans apres") analysis confirms the understanding of firm investment behavior that Eisner analyzed so well long ago, using less technical but no less insightful language. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research.