Advanced Search
MyIDEAS: Login to save this paper or follow this series

Tobin's Q and Financial Policy

Contents:

Author Info

  • Robert S. Chirinko

Abstract

Recent research in macroeconomics has emphasized the importance of linking the financial and real sectors and the need for working with optimizing models. Tobin’s Q model of investment would appear to provide a framework that can satisfy these two criteria. In contrast to the original presentation of the Q model, the formal development has not recognized that the firm actively participates in a number of financial markets; in this broader context, we show that Q is likely to be an uninformative and possibly misleading signal for investment expenditures . We then endeavor to turn this negative theoretical result to positive advantage in resolving a number of empirical problems with Q models, but the modifications dictated by the theory receive little support from the data.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w2082.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2082.

as in new window
Length:
Date of creation: Nov 1986
Date of revision:
Publication status: published as From Journal of Monetary Economics, Vol. 19, No. 1, pp. 69-87, (January 1987).
Handle: RePEc:nbr:nberwo:2082

Note: EFG ME
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
  2. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-24, January.
  3. Barnea, Amir & Haugen, Robert A & Senbet, Lemma W, 1981. "An Equilibrium Analysis of Debt Financing under Costly Tax Arbitrage and Agency Problems," Journal of Finance, American Finance Association, vol. 36(3), pages 569-81, June.
  4. Thomas J. Sargent, 1980. "Interpreting economic time series," Staff Report 58, Federal Reserve Bank of Minneapolis.
  5. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  6. Poterba, James M. & Summers, Lawrence H., 1983. "Dividend taxes, corporate investment, and `Q'," Journal of Public Economics, Elsevier, vol. 22(2), pages 135-167, November.
  7. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  8. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
  9. Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 67-140.
  10. Blanchard, Olivier J. & Wyplosz, Charles, 1981. "An empirical structural model of aggregate demand," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 1-28.
  11. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
  12. Mussa, Michael L, 1977. "External and Internal Adjustment Costs and the Theory of Aggregate and Firm Investment," Economica, London School of Economics and Political Science, vol. 44(174), pages 163-78, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Michael P. O'Malley, 1996. "Tax exhaustion, firm investment, and leasing; a test of the Q model of investment," Finance and Economics Discussion Series 96-31, Board of Governors of the Federal Reserve System (U.S.).
  2. Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
  3. Richard W. Kopcke, 1992. "Tobin's Q, economic rents, and the optimal stock of capital," Working Papers 92-3, Federal Reserve Bank of Boston.
  4. Holger Strulik, 1999. "Capital Tax Reform, Corporate Finance, and Economic Growth and Welfare," Quantitative Macroeconomics Working Papers 19908, Hamburg University, Department of Economics.
  5. Hansen, Sten, 1999. "Agency Costs, Credit Constraints and Corporate Investment," Working Paper Series 79, Sveriges Riksbank (Central Bank of Sweden).
  6. Alan Carruth & Andy Dickerson & Andrew Henley, 1998. "Econometric Modelling of UK Aggregate Investment: The Role of Profits and Uncertainty," Studies in Economics 9812, Department of Economics, University of Kent.
  7. Gonzalez, Pedro & Vasconcellos, Geraldo M. & Kish, Richard J., 1998. "Cross-border mergers and acquisitions: The undervaluation hypothesis," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(1), pages 25-45.
  8. Richard W. Kopcke, 1995. "Tobin's Q, economic rents, and the optimal stock of capital," Working Papers 95-4, Federal Reserve Bank of Boston.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2082. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.