Financial Constraints, Asset Tangibility, andCorporate Investment*
نویسنده
چکیده
Pledgeable assets support more borrowing, which allows for further investment in pledgeable assets. We use this credit multiplier to identify the impact of nancing frictions on corporate investment. The multiplier suggests that investmentcash ow sensitivities should be increasing in the tangibility of rmsassets (a proxy for pledgeability), but only if rms are nancially constrained. Our empirical results con rm this theoretical prediction. Our approach is not subject to the Kaplan and Zingales (1997) critique, and sidesteps problems stemming from unobservable variation in investment opportunities. Thus, our results strongly suggest that nancing frictions a¤ect investment decisions.
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