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Twice constrained investment under uncertainty: A mixed time model

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  • McGee, M. Kevin

Abstract

This paper explores the investment decision of a firm facing both an irreversibility constraint and a financial constraint on investment. I show that, for all but the fastest growing firms, the planned investment delaying impact of an irreversibility constraint dominates the planned investment accelerating impact of a financing constraint. This result is especially likely to hold in a reality where firms have a variety of strategies not modeled here, from holding cash reserves to taking on debt, that can mitigate the financing constraint.

Suggested Citation

  • McGee, M. Kevin, 2010. "Twice constrained investment under uncertainty: A mixed time model," Research in Economics, Elsevier, vol. 64(2), pages 110-120, June.
  • Handle: RePEc:eee:reecon:v:64:y:2010:i:2:p:110-120
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    References listed on IDEAS

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