Over the past decade, a number of researchers have extended conventional models of business fixed investment to … incorporate a role for financial constraints' in determining investment. This paper reviews developments and challenges in this … challenges. First, I describe analytical underpinnings of models of capital-market imperfections in the investment process, and …

neoclassical growth model. Investment rates and total factor productivity start out low and rise over time. These model dynamics …

We develop a model of investment with financial constraints and use it to investigate the relation between investment … between q and investment, relative to the frictionless benchmark. We present a calibrated version of the model, which, due to … this effect, generates realistic correlations between investment, q, and cash flow …

consumption, portfolio allocation, financing, investment, and business exit decisions. The optimal capital structure is determined …

, consumption/savings, and portfolio selection. For a lump-sum investment payoff and an agent with a sufficiently strong … precautionary savings motive, an increase in volatility can accelerate investment, contrary to the standard real options analysis …. When the agent can trade the market portfolio to partially hedge against investment risk, the systematic volatility is …

empirical investment literature. This result is frequently taken to support the view that capital market imperfections are an … important element for understanding investment. This paper challenges that conclusion. We argue that allowing the profit … based regression results in which profits are a significant factor determining investment. To be clear, our ability to …