We study the effect of asset liquidity (“tangibility”) on firm policies in the presence of financing constraints. We do so in a real options framework that allows for the simultaneous determination of investment and financing. In the presence of financing imperfections, firms that operate more tangible assets have larger credit capacity. By expanding the firm’s capital base, the investment proc...

We study empirically the effect of focus (specialization) vs. diversification on the return and the risk of banks using data from 105 Italian banks over the period 1993–1999. Specifically, we analyze the tradeoffs between (loan portfolio) focus and diversification using data that is able to identify loan exposures to different industries, and to different sectors, on a bank-by-bank basis. Our r...

We study how access to private equity financing affects real firm activities using a broad panel of publicly traded U.S. firms that raise external equity through private placements (PIPEs) between 1995 and 2008. The public firms relying on PIPEs are generally small, high-tech firms that cannot finance investment internally and likely face severe external financing constraints; PIPEs are by far ...

This paper studies the macroeconomic implications of …rms’precautionary real investment behavior in response to the anticipation of future …nancing constraints. Firms increase their demand for liquid and safe but low-return investments in anticipation of future borrowing constraints in order to decrease the probability of having to forego future pro…table investment opportunities. I show in a c...

We present a dynamic model of an IPO market in which firms go public to raise capital for investment. The original shareholders have inside information with respect to the quality of their firm’s investment opportunities, and they decide whether to go public, how much capital to raise and invest, and how to price the IPO. Outside investors are of one of two types: some investors know and unders...

This study examines the corporate investment behavior during China’s reform era. We apply the Generalized Method of Moments (GMM) estimation to the investment Euler equation models that characterize the Chinese firms’ investment decisions. Based on the estimated structural parameters, we derive the effective discount rate (“implied” cost of capital) perceived by the firm managers to decide inve...

We study empirically the effect of focus (specialization) vs. diversification on the return and the risk of banks using data from 105 Italian banks over the period 1993–1999. Specifically, we analyze the tradeoffs between (loan portfolio) focus and diversification using a unique data set that is able to identify individual bank loan exposures to different industries, to different sectors, and t...