Security issuance and the business cycle

Enzo Dia and Fabrizio Casalin

Economics Bulletin, 2013, vol. 33, issue 3, 1751-1761

Abstract: We use a simple model of investment and external finance to analyze the relationship among the issuance of securities, financial market valuations and, alternatively, aggregate investment or cash flows. We find that issuance is driven by market valuations, and does not influence aggregate investment, whereas investment has a negative impact on equity issuance. Moreover, we obtain widespread evidence that equity and debt are complementary sources of finance, and that positive shocks to cash flows are associated with larger issuance of debt.

Keywords: Equity; Debt; Investment; Tobin's q (search for similar items in EconPapers)
JEL-codes: G0 G1 (search for similar items in EconPapers)
Date: 2013-07-11
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Citations: View citations in EconPapers (1)

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