Investment characteristics and the form of external financing are linked. Factor analysis indicates that the principal determinant of the financing choice is whether an investment's payoffs can be described as a hit or miss. Hit-or-miss investments are more likely to be equity financed. Equity...

This paper investigates the relation between investor sentiment, executive compensation and corporate investment. We derive a model that shows the share price will be jointly affected by investor sentiment and the corporate investment decision. The model predicts that, if a compensation contract...