Discusses the connection between conventional models of business investment and the literature on the imperfections in …. This cost premium for external financing is integrated into an existing model of firm financial and investment decisions … income ratio. Results show that firms that retain most of their income have a greater sensitivity of investment to cash flow …

research that uses cross-sectional differences in firm behavior to test for financing constraints on investment. This reply … of internal finance. Second, the KZ regression results (lower sensitivity of investment to cash flow for firms classified …

research that uses cross-sectional differences in firm behavior to test for financing constraints on investment. This reply … of internal finance. Second, the KZ regression results (lower sensitivity of investment to cash flow for firms classified …

Most empirical models of investment rely on the assumption that firms are able to respond to prices set in centralized … determinant of investment spending, because of a "financing hierarchy," in which internal finance has important cost advantages … cost of capital, asset prices, or tax-based investment incentives. To the extent that firms are constrained in their …