Most empirical models of investment rely on the assumption that firms are able to respond to prices set in centralized securities markets (through the quot;cost of capitalquot; or quot;qquot;). An alternative approach emphasizes the importance of cash flow as a determinant of investment...

This paper examines the long-standing theory that small firm growth is often constrained by the quantity of internal finance. Under plausible assumptions, when financing constraints are binding, an additional dollar of internal finance should generate slightly more than an additional dollar of...

The sharp increase in Ramp;D investment in recent decades has important but unexplored implications for corporate liquidity management. Because Ramp;D has high adjustment costs and is financed with volatile sources, it is very expensive for firms to adjust the flow of Ramp;D in response to...

Studies of tax policy and corporate investment have been prominent in public finance and macroeconomic research. By integrating corporate income tax rates, investment tax credits, and the value of depreciation allowances into the quot;cost of capital,quot; economists have analyzed the effects of...