A model of investment subject to financing constraints
نویسندگان
چکیده
This paper unifies the recent analysis of macroeconomic fluctuations of [Brunnermeier and Sannikov(2012)], in which firms subject to financing constraints can sell capital in order to avoid liquidation, with the earlier related paper of [Milne and Robertson(1996)], in which firms manage cash flow, output and investment decisions in order to lower the probability of liquidation. This yields more tractable solution, elucidates the underlying economic mechanisms and reveals how the key result reported by Brunnermeier and Sannikov (a bimodal ergodic distribution of firm net worth) varies with parameter choice, arising in some situations but not others. [97 words] Journal of Economic Literature number: E44
منابع مشابه
An Investigation into the Effect of CEO’s Perceptual Biases on Investment Efficiency and Financing Constraints of the Iranian Listed Firms
Efficient market hypothesis predicts that capital markets are beset with cer-tain biases which result from wrong estimation, and negatively influence shareholders’ expectations for higher returns, which in turn affects invest-ment efficiency, financial constraints and corporate performance efficacy in competitive markets, and eventually mitigates firm value. The present study aims at examining ...
متن کاملارائه مدل تعیین میزان مخارج سرمایهای در شرکتهای پذیرفته شده در سازمان بورس اوراق بهادار تهرانبا استفادهاز اطلاعات حسابداری
Financing strategy in corporations is one of the most important subject matters among accounting and finance scholars. Investment in companies to increase profitability is one of the important purposes of financing activities. Different methods for execution of financing activities include: Internal finance, external finance and combination of these two. The problem is that whether there is...
متن کاملFinancing constraints and returns on Physical investment
Using an intertemporal model of investment decisions under financing constraints we show that the Euler equation approach can be used to identify the effect of financing constraints on investment returns even when the premium on external financing does not change over time. This result is made possible by the introduction of a tangibility constraint to a commonly used dynamic optimization model...
متن کاملTesting Financing Constraints on Firm Investment using Variable Capital
A recent literature has criticised the sensitivity of a firm’s investment to its own cash flow as an adequate measure of financing constraints. In this paper we develop a new method to detect the presence of financing constraints at firm level. We consider a structural dynamic model of investment with financing imperfections and with both fixed and variable capital. We solve the model and simul...
متن کاملInvestment Options with Debt Financing Constraints
Building on the Mauer and Sarker (2005) model that captures both investment flexibility and optimal capital structure and risky debt, we study the impact of debt financing constraints on firm value, the optimal timing of investment and other important variables like the credit spreads. The importance of debt financing constraints on firm value and investment policy depends largely on the relati...
متن کامل