Chow, Clement K.W.; Song, Frank M.; Wong, Kit Pong - In: International Review of Economics & Finance 19 (2010) 2, pp. 219-227
This paper examines the incentive effects of the soft budget constraint on the investment behavior of firms in general and on the investment-cash flow sensitivity in particular. To this end, we develop a simple model of moral hazard that takes the soft budget constraint into account. Within this...