Investor protection is associated with greater investment-sensitivity to q and lower investment-sensitivity to cash flow. Finance plays a role in causing these effects; in countries with strong investor protection external finance increases more strongly with q, and declines more strongly with...

The recent financial crisis highlights the importance of understanding how financial market conditions impact the real economy. We ask whether access to external finance typically varies over time, and if so what the effects are on investment and employment. Consistent with time-varying external...

Previous studies find that U.S. firms make large equity issues when stock prices are high for the purpose of building precautionary cash savings. We find these effects internationally, but only in countries where it is less costly to issue equity. In countries where external finance is costlier,...