Investments and ...nancial structure with imperfect ...nancial markets: an intertemporal discrete-time framework

This paper deals with the problem of simultaneity between the ...rm’s investments and ...nancial structure, in a context of dynamic optimization, characterised by two main assumptions: ...rst of all, diverging incentives for managers and shareholders, secondly, ...nancial markets imperfections generating a risk premium on the borrowed ...nance. A ”discrete-time” framework has been introduced in order to better model the relevance of timing in the co-ordination process between ...nancial and investment decisions, assumed to take place simultaneously. The simple model proposed here may provide some intuitive interpretation for a number of phenomena such as the propagation of ...nancial shocks into the real economy and the countercyclical mark-ups.