Optimality of Investment under Imperfectly Enforceable Financial Contracts
We investigate the optimality of aggregate investment and its policy implications under an environment in which financial contracts are imperfectly enforceable. We show that too much investment occurs when the ratio of own capital to debt is smaller than the ratio of project returns in terms of future values across periods, and too low investment occurs otherwise. A subsidy (tax) on the risk-free interest income can close the over- (under-) investment gap, but this policy may not be welfare improving. Copyright 2003, Oxford University Press.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 41 (2003)
Issue (Month): 2 (April)
|Contact details of provider:|| Postal: |
Fax: 01865 267 985
Web page: http://ei.oupjournals.org/Email:
More information through EDIRC
|Order Information:||Web: http://www.oup.co.uk/journals|
When requesting a correction, please mention this item's handle: RePEc:oup:ecinqu:v:41:y:2003:i:2:p:318-324. 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: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.