Conditional Investment-Cash Flow Sensitivities and Financing Constraints

• We study the sensitivity of investment to cash flow conditional on measures of q in an adjustment costs framework with costly external nance. We present a benchmark model in which this conditional investment-cash flow sensitivity increases monotonically with the cost premium for external - finance, for firms in a nancially constrained regime. Using simulated data, we show that this pattern is found in linear regressions that relate invest- ment rates to measures of both cash flow and average q. We also derive a structural equation for investment from the first order conditions of our model, and show that this can be estimated directly.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Nyckelord

Investment

cash flow

financing constraints

Publikations- och innehållstyp

vet (ämneskategori)

rap (ämneskategori)