Hirth, Stefan; Uhrig-Homburg, Marliese - In: Journal of Corporate Finance 16 (2010) 2, pp. 243-258
This paper examines the effect of debt and liquidity on corporate investment in a continuous-time framework. We show that stockholder-bondholder agency conflicts cause investment thresholds to be U-shaped in leverage and decreasing in liquidity. In the absence of tax effects, we derive the...