Using multiple discriminant analysis, we construct an index that measures firms' external financial constraints in an Australian setting. We form portfolios of firms based on our financial constraints index and find that financially constrained firms earn lower return than their unconstrained...

We jointly study the impact of financial constraints on Australian companies' investment decisions and demand for liquidity. By examining a large sample of Australian firms over the period 1990–2003, we find that financial constraints not only reduce the sensitivity of investment to the...

Building on Banker, Byzalov, and Plehn-Dujowich’s (2014) congestion cost theory, we model firms’ tradeoff between rigid cost structures and high inventory levels in reducing congestion costs caused by uncertain demand. We show that more inventory results in lower cost rigidity, while the...

We jointly study the impact of financial constraints on Australian companies' investment decisions and demand for liquidity. By examining a large sample of Australian firms over the period 1990-2003, we find that financial constraints not only reduce the sensitivity of investment to the...