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 …

product market, concerning in particular entry barriers, are negatively related to investment. The implications of our … analysis are clear: regulatory reforms, especially those that liberalize entry, are very likely to spur investment …