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Textbook theory assumes that firm managers maximize the net present value of future cash flows. But when you ask them, real-world firm managers consistently say that they are maximizing something else entirely: earnings per share (EPS). Perhaps this is a mistake. No matter. We take firm managers...
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In several OECD countries, investment rates in the business sector grew strongly in the second half of the 1990s. In … some cases, the strength of private investment relative to output growth had raised concerns about the risk of capital … overhang and the prospect of a prolonged period of slow capital formation in order to bring investment levels back to more …
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