Evidence on the “funding gap” for investment innovation is surveyed. The focus is on financial market reasons for underinvestment that exist even when externality-induced underinvestment is absent. We conclude that while small and new innovative firms experience high costs of capital that...

A large discrepancy exists on the use of the investment–cash flow sensitivity as a measure of financing constraints of firms. We examine this discrepancy by considering business group affiliated firms in Pakistan. The study includes 58 group affiliated firms and 32 non-group affiliated firms...

Does corporate finance literature accurately identify firms facing homogeneous financing constraints when studying the impact of financing constraints on corporate investment? The short answer is no. The common practice of using pre-determined percentiles of a financing constraint metric...

We examine firms' simultaneous choice of investment, debt financing and liquidity in a large sample of US corporates between 1980 and 2014. We partition the sample according to the firms' financial constraints and their needs to hedge against future shortfalls in operating income. In contrast to...

We identify a firm's growth type by its valuation volatility which proxies for the extent to which asymmetric information arises from growth opportunities rather than from assets-in-place. We show that firm investment style (measured by R&D/[Capex R&D]) is persistent and positively aligned with...

We posit that firms with valuable real options have higher demand for cash and liquid assets and propose a simple procedure for identifying firms with valuable real options. Our procedure assumes that, all else being equal, a firm's real options are more valuable when their underlying volatility...

Treating the potential endogeneity problems of the empirical specifications in prior studies, I employ a dynamic multi-equation model in which firms make interdependent decisions in financing, investment, and distribution, under the constraint that sources and uses of cash must be equal. I argue...

I examine acquisitions of private firms by public acquirers to better understand the effects of financial constraints on the division of economic gains in takeovers. Empirical tests exploit interstate bank branching deregulation, which relaxes financial constraints on private firms and can...

We show that firms collect more than 70% of their cash flow in the second half of the fiscal year, and firms that collect more cash by year-end earn a 6% higher per annum risk premium and save more cash. We rationalize these facts in a quantitative investment-based asset pricing model. Immediate...

In this paper we use balance-sheet data and information on bankruptcy to study the relationship between investment, financial constraints, and bankruptcy in a posttransition country. Our data constitute a dynamic panel and cover the period 2006-2011, which also allows us to study the impact of...