In order to identify the relevant sources of firms' financing constraints, we ask what financial frictions matter for … corporate policies. To that end, we build, solve, and estimate a range of dynamic models of corporate investment and financing … common technology, but differ in the friction generating financing constraints. Using panel data on Compustat firms for the …

-theoretic dynamic agency model of firms from observed financing and investment choices. In the model, an optimal contract resolves the … that in order to rationalize observed firm financing and investment policies, the agency conflict between investors and …

competition has first order effects on the cash holdings and financing decisions of constrained firms, in ways consistent with our …

choices are too small to explain financing decisions. We also show that by adding agency conflicts in the model and giving the …