Monetary Policy, Corporate Finance, and Investment

Abstract In response to a change in interest rates, younger firms not paying dividends adjust both their capital expenditure and borrowing significantly more than older dividends. The reason is that the debt of non-dividend payers far sensitive fluctuations collateral values, which are affected by monetary policy. results robust wide range possible confounding factors. Other channels, including movements payments, product demand, profitability, mark-ups, also significant but seem unlikely explain heterogeneity expenditure. Our findings suggest these types financial frictions play an important role transmission