International Finance and Firm Investment
AbstractThe authors examine the neoclassical investment model using a panel of U.S. manufacturing firms. The standard model with no financing constraints cannot be rejected for firms with high (presample) dividend payouts. However, it is decisively rejected for firms with low (presample) payouts (firms the authors expect to face financing constraints). Here, investment is sensitive both to firm cash flow and macroeconomic credit conditions, holding constant investment opportunities. Sample splits based on firm size or maturity do not produce such distinctions. The latter comparison identifies firms where 'free-cash-flow' problems might be expected to produce correlations between investment and cash flow. Copyright 1995 by Ohio State University Press.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 27 (1995)
Issue (Month): 3 (August)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
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- Gayane Hovakimian & Sheridan Titman, 2003.
"Corporate Investment with Financial Constraints: Sensitivity of Investment to Funds from Voluntary Asset Sales,"
NBER Working Papers
9432, National Bureau of Economic Research, Inc.
- Hovakimian, Gayane & Titman, Sheridan, 2006. "Corporate Investment with Financial Constraints: Sensitivity of Investment to Funds from Voluntary Asset Sales," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(2), pages 357-374, March.
- Emilio Colombo & Luca Stanca, 2003.
"Investment Decisions and the Soft Budget Constraint: Evidence from Hungarian Manufacturing Firms,"
68, University of Milano-Bicocca, Department of Economics, revised Dec 2003.
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- J. Christina Wang, 2006. "Financial innovations, idiosyncratic risk, and the joint evolution of real and financial volatilities," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
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- Eleni Angelopoulou & Heather D. Gibson, 2007. "The Balance Sheet Channel of Monetary Policy Transmission: Evidence from the UK," Working Papers 53, Bank of Greece.
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