Motivated by the literature on the finance–growth nexus, this paper explores the mechanisms through which finance affects corporate investments and capital accumulation. We separate the effects of financial conditions from those of financial development. Based on a sample of firms from five...

We investigate how a combination of limited liability and preexisting debt distort firms' investment and equity payout decisions. We show that equity holders have incentives to "double-sell" cash flows in default, leading to overinvestment, provided that the firm has preexisting debt and the...

The banking literature has established that banks can alleviate information asymmetries between lenders and borrowers, while the Q literature has used cash flow sensitivity analysis to test whether financing constraints hinder investment. This paper investigates whether bank ties in Japan were...