We create a novel measure of market-nurtured optimism in that managers become more optimistic if the market had responded more favorably, and to a larger extent to positive earnings surprises, than to negative earnings surprises. These market-nurtured managers are prone to engage in...

We use a panel of over 116,000 Chinese firms of different ownership types over the period 2000–2007 to analyze the linkages between investment in fixed and working capital and financing constraints. We find that those firms characterized by high working capital display high sensitivities of...