I estimate a dynamic game where firms make external financing decisions and hold cash taking into account the corresponding behavior of their peers. A key advantage of this approach is that I can obtain an empirical measure of peer effects that stem from decision makers' dynamic optimization...

We construct a model to show that predatory strategies by a financially strong rival can cause a financially weak firm to underinvest. This threat intensifies when the two firms produce similar products and share similar future investment opportunities. We show that cash holdings become more...

Cash holdings and bank credit lines are the main sources of corporate liquidity. Similar to the prediction for cash holdings, theory predicts that when facing more intense product market competition, a firm should use more credit lines. The liquidity provided by a credit line allows a firm to...