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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- 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.
- 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.
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- Maria Angelica Arbelaez & Juan Jose Echavarria, 2002. "Credit, Financial Liberalization and Manufacturing Investment in Colombia," Research Department Publications 3145, Inter-American Development Bank, Research Department.
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