Arbeitspapier

Modeling the Effects of Financial Constraints on Firm´s Investment

The paper develops a model of firm´s investment under uncertainty with financial market imperfections and analyzes the effects of financial constraints on firm´s investment. Firm´s investment is an increasing function of the firm´s marginal q, however the investment function is characterized by an upper bound that depends on the firm´s borrowing capabilities. The firm´s marginal q is the sum of the expected value of the marginal profitability of the physical capital stock and of a positive external finance premium. In the presence of financial market imperfections the firm forms expectations about future financial conditions and these expectations raise the firm´s current marginal q. Similarly, the shadow price of firm´s debt is the sum of the interest cost of debt repayment and of a provision for external finance that depends on the firm´s expectations over future financial conditions.

Sprache
Englisch

Erschienen in
Series: Economics Discussion Papers ; No. 2007-38

Klassifikation
Wirtschaft
Investment; Capital; Intangible Capital; Capacity
Thema
firm´s investment
financial constraints
Tobin´s marginal q
uncertainty

Ereignis
Geistige Schöpfung
(wer)
Tomat, Gian Maria
Ereignis
Veröffentlichung
(wer)
Kiel Institute for the World Economy (IfW)
(wo)
Kiel
(wann)
2007

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Tomat, Gian Maria
  • Kiel Institute for the World Economy (IfW)

Entstanden

  • 2007

Ähnliche Objekte (12)