Credit constrained firms prefer types of capital that generate significant pledgeable output and are liquid, since they loosen current and future credit constraints. Because pledgeability and liquidity are low for long-term firm-specific capital, a negative temporary aggregate productivity shock...

This paper investigates the effect of financing frictions due to source of capital, on firm investment and value. Using instrumental variables approach that controls for endogeneity arising from demand-side factors, we find that firms with access to public debt markets have 11% higher investment...

The paper highlights the encountered problems in implementing real options under more realistic assumptions such as business cycle risk and normally distributed cash flows. The problems considered include (i) estimating empirical distribution of cash flows from real option investments; (ii)...

This paper proposes a macro function of investment to capture the key determinants and explore the mechanism of the determination of aggregate investment. The long-established empirical findings in the field are that investment and output are strongly correlated while costs of capital have...

In India, huge progress has been witnessed in the dairy, poultry, fruits and vegetables arena. But as far as cold chain storage is concerned, India lags behind several generations when compared with similar supply chains of the developed world. Further, it is no longer sufficient for any...

Intangible-intensive firms in the U.S. hold an enormous amount of liquid assets that are in fact short-term debts issued by financial intermediaries. This paper builds a macro-finance model that captures this structure. A self-perpetuating savings glut emerges in equilibrium. As intangibles...

The neoclassical q-theory is a good start to understand the cross section of returns. Under constant return to scale, stock returns equal levered investment returns that are tied directly with characteristics. This equation generates the relations of average returns with book-to-market,...

The q-theory implies that investment is a first-order determinant of the cross section of expected returns, and that optimal investment drives the external financing anomalies. Our neoclassical model simultaneously and in many cases quantitatively reproduces: Procyclical equity issuance waves;...

We investigate implications for the cost of capital in a model with agency conflicts between inside and outside shareholders, where the severity of agency costs depends on a parameter representing investor protection. Using firm-level data for Italy and Germany we find significant differences in...

Building on recent developments in behavioral asset pricing, we develop a model in which an increase in the dispersion of investor beliefs under short-selling constraints predicts a bubble, or a rise in a stock's price above its fundamental value. Our model predicts that managers respond to...