Financing and Investment in Plant and Equipment and Research and Development
AbstractIn this stuy a dynamic model of firm behavior is developed which integrates real and financial decisions. The model combines the effects of capital structure and input adjustirent costs on the process of capital accumulation. The existence, uniqueness and stability conditions of the long-run eguilibrium and the dynamic properties of the factor demand are explored. The equations derived from the theoretical model are estimated using firm cross-section time series data. The results indicate that for both Plant and Equipment (P&E) and Research and Development (R&D),the debt-eguity ratio significantly affects the investment demands and the elasticities are highly inelastic. The effect is stronger for P&E than for R&D capital in the long run, while the effects on P&E and R&D investment are quite similar in the short run.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1017.
Date of creation: Nov 1982
Date of revision:
Publication status: published as Bernstein, Jeffrey I. and M. Ishaq Nadiri. "Financing and Investment in Plant and Equipment and Research and Development," Prices, Competition and Equilibrium, eds. M.H. Peston and R.E. Quandt, Oxford: Philip Allan; Totowa, N.J.: Barnes and Noble. 1986.
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