We find a significant negative effect of idiosyncratic stock-return volatility on investment. We address the endogeneity problem of stock return volatility by instrumenting for volatility with a measure of a firm's customer base concentration. We propose that the negative effect of idiosyncratic...

We hypothesize that established firms with innovative projects and technologies will make relatively greater use of arm's length financing (such as public debt and equity); whereas less innovative firms will tend to use relationship based borrowing (such as bank borrowing). The hypothesis is...