Twice constrained investment under uncertainty: A mixed time model

M Kevin McGee

Research in Economics, 2010, vol. 64, issue 2, 110-120

Abstract: This paper explores the investment decision of a firm facing both an irreversibility constraint and a financial constraint on investment. I show that, for all but the fastest growing firms, the planned investment delaying impact of an irreversibility constraint dominates the planned investment accelerating impact of a financing constraint. This result is especially likely to hold in a reality where firms have a variety of strategies not modeled here, from holding cash reserves to taking on debt, that can mitigate the financing constraint.

Keywords: Investment; Uncertainty; Irreversible; Financing; constraint (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:64:y:2010:i:2:p:110-120

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