Dynamic Investment Models and the Firm's Financial Policy.
In this paper, the authors investigate the sensitivity of investment to the availability of internal funds using the hierarchy of finance approach to corporate finance. They characterize the empirical implications of this approach for dynamic investment models and test these implications using firm-level data. The model the authors estimate is based on the Eulet equation for optimal capital accumulation in the presence of convex adjustment costs. The theoretical model explicitly allows for de...Expand abstract
- Review of Economic Studies
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