This book presents a new approach to the valuation of capital asset investments and investment decision-making. Starting from simple premises and working logically through three basic elements (capital, income, and cash flow), it guides readers on an interdisciplinary journey through the...

Firm-level investment paths are commonly characterised by periods of low or zero investment punctuated by large investment ‘spikes’. We document that such spikes are important for understanding firm and aggregate level investment in the UK. We show that annual variation in aggregate...

We examine how legal creditor rights are related to debt financing and corporate investment over the business cycle. Using firm-level data from 40 countries, we find that creditor rights are associated with greater debt financing and investment during economic downturns, but creditor rights have...

We propose a model of a firm's reversible investment decision with macroeconomic conditions based on optimal switching of a diffusion process. The switching costs of a diffusion regime and the cash flow generated by the firm depend on a business cycle which alternates via a Markov chain, and the...

Recent literature has shown that corporate indebtedness affects firm-level investment behavior but not necessarily aggregate business cycles. I argue that interactions among heterogeneous firms play an important role in equilibrium. After a downturn, financially unconstrained firms in...

We show that, contrary to popular belief, capital markets do not drive short-termism. By comparing public and private European firms in countries with different institutional infrastructures, we show that being listed in the stock market plays a positive role in a firm’s investment policies,...

This study investigates the effect of foreign ownership on firm investment and how the country-level governance quality adjusts the relationship between foreign ownership and firm investment. Using the 2016-2022 World Bank Enterprise Surveys (WBES) database, the results reveal that foreign-owned...

The purpose of this work is to verify the existence of financial constraints for investment in Brazil, an emerging market with growing international visibility. Using panel data methodology and GMM, we estimate dynamic investment models based on the Euler equation and Tobin's q for a panel...

This paper studies the capital allocation decisions of firms that are comparable except for ownership under a unique setting using investment level data. We find allocative inefficiency across ownership to be exacerbated under policy distortions through subsidized credits targeted at state-owned...

We study the differences in the allocation of cash flow between Western European private and public firms. Public firms have a significantly higher investment-cash flow sensitivity than comparable private firms. These differences in investment-cash flow sensitivities are not due to more...