This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Modeling the Effects of Financial Constraints on Firm´s Investment

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Tomat, Gian Maria
Abstract

The paper develops a model of firm´s investment under uncertainty with financial market imperfections and analyzes the effects of financial constraints on firm´s investment. Firm´s investment is an increasing function of the firm´s marginal q, however the investment function is characterized by an upper bound that depends on the firm´s borrowing capabilities. The firm´s marginal q is the sum of the expected value of the marginal profitability of the physical capital stock and of a positive external finance premium. In the presence of financial market imperfections the firm forms expectations about future financial conditions and these expectations raise the firm´s current marginal q. Similarly, the shadow price of firm´s debt is the sum of the interest cost of debt repayment and of a provision for external finance that depends on the firm´s expectations over future financial conditions.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.economics-ejournal.org/economics/discussionpapers/2007-38/count
File Format:
File Function:
Download Restriction: no

Publisher Info
Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2007-38.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: 2007
Date of revision:
Handle: RePEc:zbw:ifwedp:6165

Contact details of provider:
Postal: D�sternbrooker Weg 120, D-24105 Kiel
Phone: +49 431 8814-1
Fax: +49 431 8814528
Email:
Web page: http://www.economics-ejournal.org/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (ZBW - German National Library for Economics).

Related research
Keywords: firm´s investment financial constraints Tobin´s marginal q uncertainty

Find related papers by JEL classification:
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity

This paper has been announced in the following NEP Reports:

Statistics
Access and download statistics

Did you know? All the bibliographic data shown here has been contributed by volunteers, thereby helping to keep this service free.

This page was last updated on 2008-10-7.


This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.