We compare the ability of three measurement error remedies to deliver unbiased estimates of coefficients in investment regressions. We examine high-order moment estimators, dynamic panel estimators, and simple instrumental variables estimators that use lagged mismeasured regressors as...

Many recent empirical investment studies have found that the investment of financially constrained firms responds strongly to cash flow. Paralleling these findings is the disappointing performance of the q theory of investment: even though marginal q should summarize the effects of all factors...

This chapter discusses how applied researchers in corporate finance can address endogeneity concerns. We begin by reviewing the sources of endogeneity—omitted variables, simultaneity, and measurement error—and their implications for inference. We then discuss in detail a number of...