A Uni...ed Model of Investment Distortions: Theory and Evidence¤
نویسندگان
چکیده
This paper develops and tests a structural investment model nesting the Q theory and ...ve distortions: contract-induced CEO myopia, empire building, shirking, debt overhang, and ‡otation costs. Supporting the empire building hypothesis, founders’ (non-founders’) investment is consistent with their deriving an annual bene...t of $3.30 ($0.40) per $1000 of capital. Evidence of contract-induced myopia is also found. Coe¢cients on marginal q are consistent with regions of inertia due to ‡otation costs. However, cash-‡ow coe¢cients suggest the existence of other non-linear costs of external funds. Signi...cant overhang e¤ects are only found for low Q ...rms. The Q and shirking theories are rejected. JEL Classi...cation: G31, G32
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