The recovery in private business investment globally remains extremely weak more than seven years after the financial crisis. This paper contributes to the ongoing policy debate on the factors behind this weakness by analyzing the role of growth prospects and uncertainty in explaining...

All conceivable solutions to the internal rate of return equation are shown to have meaning as well as use. Internal rates of return are the units in which value is measured and the quantities of such units. This result implies a single internal rate of return cannot be an investment criterion....

We investigate the cost of capital in a model with an agency conflict between inside managers and outside shareholders. Inside ownership reflects the classic tradeoff between incentives and risk diversification, and the severity of agency costs depends on a parameter representing investor...

The internal rate of return (IRR) is often used by managers and practitioners for investment decisions. Unfortunately, it has serious flaws: among others, (i) multiple real-valued IRRs may arise, (ii) complex-valued IRRs may arise, (iii) the IRR is, in general, incompatible with the net present...

It is often asserted that the financial crisis of 2008 caused a recession in the real economy by restricting the supply of credit to firms and households, but this view has been questioned by a number of researchers. This paper uses novel data on lending relationships from Uniform Commercial...

We analyze whether variation in systemic risk in the banking system (also known as “bank systemic risk”) can explain corporate investment. We show that in a sample of publicly listed firms in 10 advanced and emerging markets economies during the period 1990–2013, bank systemic risk is...

Using a news-based index of geopolitical risk (GPR), we document a strong negative relationship between firm-level corporate investment and GPR. When the GPR index doubles, investment rate in the next quarter declines by 14% of its sample mean. The effect is more pronounced for firms with more...

Using a unique dataset of credit line drawdowns and liquidity hedging, we study the relation between credit line usage and corporate investment. In line with theoretical predictions that credit lines aid firms to invest during times of limited credit availability, our findings reveal that the...

Mitigating climate change requires aligning real economy investments with climate objectives. This pilot study measures the climate consistency of investments in transport infrastructure and vehicles in Latvia between 2008 and 2018, estimated at EUR 1.5 billion per year on average. To do so,...

This paper explores the impacts of sovereign rating changes on domestic firm investments. Utilising a large sample of 1,589 rated firms in 40 countries during the period of 1995 to 2021, we document significant impacts of sovereign rating events on firm investments, proxied by total, short- and...