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Financial Constraints Risk
We construct an index of firms' external finance constraints via generalized method of moments (GMM) estimation of an investment Euler equation. Unlike the commonly used KZ index, ours is consistentExpand
How Costly Is External Financing? Evidence from a Structural Estimation
We apply simulated method of moments to a dynamic model to infer the magnitude of financing costs. The model features endogenous investment, distributions, leverage, and default. The corporationExpand
Debt, liquidity constraints, and corporate investment: evidence from panel data
This paper presents evidence supporting the theory that problems of asymmetric information in debt markets affect financially unhealthy firms' ability to obtain outside finance and, consequently,Expand
Measurement Error and the Relationship between Investment and Q
Many recent empirical investment studies have found that the investment of financially constrained firms responds strongly to cash flow. Paralleling these findings is the disappointing performance ofExpand
Endogeneity in Empirical Corporate Finance
This chapter discusses how applied researchers in corporate finance can address endogeneity concerns. We begin by reviewing the sources of endogeneity - omitted variables, simultaneity, andExpand
Debt Dynamics
We develop a dynamic model of financial and investment policy with corporate and individual taxes, costly equity issuance, and debt constraints. The dynamic framework allows us to explain a number ofExpand
The Corporate Propensity to Save
Why do corporations accumulate liquid assets? We show theoretically that intertemporal trade-offs between interest income taxation and the cost of external finance determine optimal savings.Expand
The Effect of Uncertainty on Investment: Some Stylized Facts
The theoretical relationship between investment and uncertainty is ambiguous. This paper briefly surveys the insights that theory has to offer and then runs a series of simple tests aimed atExpand
External Finance Constraints and the Intertemporal Pattern of Intermittent Investment
Do external finance constraints affect the timing of large investment projects? Simulations of a model with fixed capital-stock adjustment costs establish the hypothesis that external financeExpand
Which Firms Follow the Market? An Analysis of Corporate Investment Decisions
We test whether stock market mispricing or private investor information in stock prices affects corporate investment. We develop an econometric methodology that disentangles stock-price movementsExpand