Investment and External Finance: An Empirical Analysis

This paper looks for evidence that the availability of external finance affects the aggregate investment of non-financial corporations of the US. We do not find any empirical support for this hypothesis. Furthermore, we find that the amount of external finance raised does not depend on the need to finance investment. Share issuance seems to be largely driven by stock market prices; moreover, quite surprisingly, it generates a positive impact on both the Tobin’s Q and debt issuance.