Using a slightly modified version of the Kaplan-Zingales (1997) model we show that it is likely that firms facing high uncertainty rely more on cash flow. Next we illustrate this result using an investment panel data model of Dutch listed firms. Using a threshold estimator we determine the...

The sensitivity of business capital formation to its user cost plays a key role in the analysis of many economic issues. Although this elasticity has been the subject of an enormous number of studies, a consensus remains elusive. We develop an estimation strategy that exploits panel data in an...