We investigate how financial constraints and agency costs impact firms' investment in China. A generalized Q investment model is constructed. It implies that firms' investment depends mainly on three factors: investment opportunity which determines the optimal investment stochastic frontier,...

“The buffer stock theory” derived from the intertemporal utility maximization predicts that an increase in wealth will dampen the motive for precautionary savings and therefore reduce consumption’s over-sensitivity with respect to income changes. Since over the last forty years Taiwan has...