Costly External Financing, Investment Timing, and Investment Cash Flow Sensitivity: A Reformulation of the Problem
University of Sfax - Institute of the High Business Studies of Sfax (IHEC)
September 1, 2008
International Research Journal of Finance and Economics, Vol. 19, pp. 107-113, 2008
This paper examines the relation between the external financing cost and the choice of the investment timing. Contrary to Lyandres (2007), this paper not only takes in consideration the variation of the investment but also the variation of its payoff. Results show that firms don't present the same degree of the investment-cash-flow sensitivity since this relation, which seems to be non-monotonic, is influenced by the evolutions of the financial cost and the investment amount.
Keywords: External financing, Investment, Cash flow
JEL Classification: G31Accepted Paper Series
Date posted: April 7, 2009
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