Non-Tobin’s q in Tests for Financial Constraints to Investment

Silvio Rendon

Chapter Chapter 2 in The Economics of Imperfect Markets, 2010, pp 33-49 from Springer

Abstract: Abstract Liquidity constrained firms may be under two very well identified investment regimes, constrained and unconstrained. In this paper I derive theoretical investment equations for both regimes and discuss the consequences of ignoring the specific form of the liquidity constrained regime. I also show that expressing the investment equation as a function of Tobin’s q is by no means necessary in theory and in practice, in particular, it is not required to test for liquidity constraints.

Keywords: Cash Flow; Euler Equation; Financial Constraint; Investment Equation; Adjustment Cost (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-7908-2131-4_2

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DOI: 10.1007/978-3-7908-2131-4_2

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