Twice constrained investment under uncertainty: A mixed time model
AbstractThis paper explores the investment decision of a firm facing both an irreversibility constraint and a financial constraint on investment. I show that, for all but the fastest growing firms, the planned investment delaying impact of an irreversibility constraint dominates the planned investment accelerating impact of a financing constraint. This result is especially likely to hold in a reality where firms have a variety of strategies not modeled here, from holding cash reserves to taking on debt, that can mitigate the financing constraint.
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Bibliographic InfoArticle provided by Elsevier in its journal Research in Economics.
Volume (Year): 64 (2010)
Issue (Month): 2 (June)
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Web page: http://www.elsevier.com/locate/inca/622941
Investment Uncertainty Irreversible Financing constraint;
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