IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Tobin's Q, economic rents, and the optimal stock of capital

Listed author(s):
  • Richard W. Kopcke
Registered author(s):

    The correspondence between the demand for capital and various measures of Tobin’s q often is tenuous (Abel and Blanchard 1986; Hayashi 1982), at times even perverse. Among the possible explanations for this apparent challenge to the q theory of investment, this paper considers the consequences of allowing the return on capita] to vary with the scale of production. When enterprises earn economic rents on inframarginal investments, the q theory of investment does not claim that changes in the optimal stock of capital must correspond consistently to changes in marginal q.

    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.bostonfed.org/economic/wp/wp1992/wp92_3.pdf
    Download Restriction: no

    Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 92-3.

    as
    in new window

    Length:
    Date of creation: 1992
    Handle: RePEc:fip:fedbwp:92-3
    Contact details of provider: Postal:
    600 Atlantic Avenue, Boston, Massachusetts 02210

    Phone: 617-973-3397
    Fax: 617-973-4221
    Web page: http://www.bos.frb.org/
    Email:


    More information through EDIRC

    Order Information: Email:


    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. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    2. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    3. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    4. Auerbach, Alan J, 1983. "Taxation, Corporate Financial Policy and the Cost of Capital," Journal of Economic Literature, American Economic Association, vol. 21(3), pages 905-940, September.
    5. Baskin, Jonathan Barron, 1988. "The Development of Corporate Financial Markets in Britain and the United States, 1600–1914: Overcoming Asymmetric Information," Business History Review, Cambridge University Press, vol. 62(02), pages 199-237, June.
    6. DeAngelo, Harry & Masulis, Ronald W., 1980. "Optimal capital structure under corporate and personal taxation," Journal of Financial Economics, Elsevier, vol. 8(1), pages 3-29, March.
    7. Hayashi, Fumio, 1985. "Corporate finance side of the Q theory of investment," Journal of Public Economics, Elsevier, vol. 27(3), pages 261-280, August.
    8. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    9. Pindyck, Robert S, 1988. "Irreversible Investment, Capacity Choice, and the Value of the Firm," American Economic Review, American Economic Association, vol. 78(5), pages 969-985, December.
    10. Greenwald, Bruce C. & Kohn, Meir & Stiglitz, Joseph E., 1990. "Financial market imperfections and productivity growth," Journal of Economic Behavior & Organization, Elsevier, vol. 13(3), pages 321-345, June.
    11. 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.
    12. Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 707-727.
    13. Ben Bernanke & Mark Gertler, 1990. "Financial Fragility and Economic Performance," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 87-114.
    14. 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.
    15. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-275, May.
    16. Chirinko, Robert S., 1987. "Tobin's Q and financial policy," Journal of Monetary Economics, Elsevier, vol. 19(1), pages 69-87, January.
    17. 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.
    18. Navin, Thomas R. & Sears, Marian V., 1955. "The Rise of a Market for Industrial Securities, 1887-1902," Business History Review, Cambridge University Press, vol. 29(02), pages 105-138, June.
    19. Alan J. Auerbach, 1979. "Wealth Maximization and the Cost of Capital," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 433-446.
    20. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411-411.
    21. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-224, January.
    22. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    Full references (including those not matched with items on IDEAS)

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

    When requesting a correction, please mention this item's handle: RePEc:fip:fedbwp:92-3. 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: (Catherine Spozio)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.