This paper examines the link between disclosure and the cost of capital. We exploit an exogenous cost of capital shock created by the Enron scandal in Fall 2001 and analyze firms' disclosure responses to this shock. These tests are opposite to the typical research design that analyzes cost of...

We construct company panel datasets for manufacturing firms in Belgium, France, Germany and the UK, covering the period 1978-89. These datasets are used to estimate a range of empirical investment equations, and to investigate the role played by financial factors in each country. A robust...

This paper examines the importance of financial constraints for firm investment expenditures by looking at the relationship between investment expenditures and proceeds from voluntary asset sales in financially healthy US manufacturing companies. Specifically, we examine whether asset sales have...

We quantify the role of financial leverage behind the sluggish post-crisis investment performance of European firms. We use a cross-country firm-bank matched database to identify separate roles for firm leverage, bank balance sheet weaknesses arising from sovereign risk, and aggregate demand...

Kaplan and Zingales (1995, hereafter KZ) criticize Fazzari, Hubbard and Petersen (1988, hereafter FHP) and much ensuing research that uses cross-sectional differences in firm behavior to test for financing constraints on investment. This reply identifies flaws in the KZ analysis. The questions...

With functionally efficient capital markets, we expect capital to flow more to the industries with the best growth opportunities. As a result, these industries should invest more and see their assets grow more relative to industries with the worst growth opportunities. We find that industries...

Scholars engage in extensive debate about the role of families and corporations in economic growth. Some propose that personal ties provide a mechanism for overcoming such transactions costs as asymmetrical information, while others regard familial connections as conduits for inefficiency, with...

We develop a model of investment with financial constraints and use it to investigate the relation between investment and Tobin's q. A firm is financed partly by insiders, who control its assets, and partly by outside investors. When their wealth is scarce, insiders earn a rate of return higher...

We provide new evidence on how monetary policy affects investment and firm finance in the United States and the United Kingdom. Younger firms paying no dividends exhibit the largest and most significant change in capital expenditure - even after conditioning on size, asset growth, Tobin's Q,...

Managers often claim that an important source of value in acquisitions is the acquiring firm's ability to finance investments for the target firm. This claim implies that targets are financially constrained prior to being acquired and that these constraints are eased following the acquisition....