User cost of capital with delayed investment grants
The usual assumption when considering investment grants is that grant payments are automatic when investments are undertaken. However, evidence from case studies shows that there can exist some time lag until funds are received by granted firms. In this paper the effects of delays in grant payments on the optimal investment policy of the firm are analyzed. It is shown how these delays lead not only to a higher financing cost but to an effective reduction in the investment grant rate, and in some cases, how benefits from investment grants could be canceled due to interactions with tax effects.
|Date of creation:||2006|
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- A. B. Treadway, 1969. "On Rational Entrepreneurial Behaviour and the Demand for Investment," Review of Economic Studies, Oxford University Press, vol. 36(2), pages 227-239.
- J. P. Gould, 1968. "Adjustment Costs in the Theory of Investment of the Firm," Review of Economic Studies, Oxford University Press, vol. 35(1), pages 47-55.
- Takayama,Akira, 1985. "Mathematical Economics," Cambridge Books, Cambridge University Press, number 9780521314985, December.
- Kort, Peter M., 1988.
"Optimal dynamic investment policy under financial restrictions and adjustment costs,"
European Economic Review,
Elsevier, vol. 32(9), pages 1769-1776, November.
- Kort, P.M., 1985. "Optimal dynamic investment policy under financial restrictions and adjustment costs," Research Memorandum FEW 195, Tilburg University, School of Economics and Management.
- Kort, Peter, 1988. "Optimal dynamic investment policy under financial restrictions and adjustment costs," Other publications TiSEM 38929238-c28e-4196-9b5b-6, Tilburg University, School of Economics and Management.
- Ruane, Frances P., 1982. "Corporate income tax, investment grants, and the cost of capital," Journal of Public Economics, Elsevier, vol. 17(1), pages 103-109, February. Full references (including those not matched with items on IDEAS)
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