We study how the delisting of a firm’s stock, and the accompanying drop in liquidity, causally affects a firm’s real economic decisions. Although delisting is endogenous, we identify a causal effect by using regression discontinuity design (RDD). This technique suits the delisting problem...

We consider a multiple mismeasured regressor errors-in-variables model. We develop closed-form minimum distance estimators from any number of estimating equations, which are linear in the third and higher cumulants of the observable variables. Using the cumulant estimators alters qualitative...

The q-theory explanations of asset pricing anomalies are quantitatively important. We perform a new asset pricing test by using GMM to minimize the difference between average stock returns in the data and average investment returns constructed from observable firm characteristics. Under various...

This paper estimates costs of external finance, applying indirect inference to a dynamic structural model where the corporation endogenously chooses investment, distributions, lever ageand default. The corporation faces double taxation, costly state verification indebt markets, and...

Tobin's q is widely accepted as proxy for an underlying quot;truequot; q, which is assumed to characterize a firm's incentive to invest. Researchers have developed numerous methods for computing q. This paper assesses the measurement quality of different proxies for q. We adapt the...

We develop a dynamic model of financial and investment policy with corporate and individual taxes, costly equity issuance, and debt constraints. The dynamic framework allows us to explain a number of empirical findings inconsistent with static tax-based theories. We show that: 1) there is no...

We revisit the problem of error-laden proxies being used for 'q' in regressions of investment on cash flow and q. We give a menu of different prior information sets that can identify the sign of the coefficient on cash flow or the sign of the difference in cash-flow coefficients between groups...

Why and how do corporations accumulate liquid assets? We show theoretically that intertemporal trade-offs between interest income taxation and the cost of external finance determine optimal savings. We find the striking result that, controlling for Tobin's q, saving and cash flow are negatively...

We construct an index of firms' external finance constraints via GMM estimation of an investment Euler equation. Unlike the commonly used KZ index, ours is consistent with firm characteristics associated with external finance constraints. Constrained firms' returns move together, suggesting the...

Firms deliberately but temporarily deviate from permanent leverage targets by issuing transitory debt to fund investment. Leverage targets conservatively embed the option to issue transitory debt, with the evolution of leverage reflecting the sequence of investment outlays. We estimate a dynamic...