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Investment Irreversibility and Finance Constraints[Note 1. I am very grateful to Richard Blundell, Michael Devereux, ...]
Author(s) -
Scaramozzino Pasquale
Publication year - 1997
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/1468-0084.00051
Subject(s) - constraint (computer aided design) , investment (military) , dividend , cash flow , economics , econometrics , sample (material) , space (punctuation) , estimation , panel data , monetary economics , financial economics , finance , mathematics , thermodynamics , computer science , physics , geometry , management , politics , political science , law , operating system
This paper analyses the investment behaviour of firms in the presence of irreversibility and of a dividend payout constraint. Estimation of investment equations for a panel of UK firms shows that the Q model performs well, over regions of the sample space, where neither constraint is likely to be binding. The constraints are able to account for the empirical significance of cash flow variables for the remaining firms in the sample.