Abstract

http://ssrn.com/abstract=227017
 
 

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Internal Finance and Firm Investment


R. Glenn Hubbard


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Anil K. Kashyap


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Toni M. Whited


University of Rochester - Simon Business School; National Bureau of Economic Research

June 1993

NBER Working Paper No. w4392

Abstract:     
We examine the neoclassical investment model using a panel of U.S. manufacturing firms. The standard model with no financing constraints cannot be rejected for firms with high (pre-sample) dividend payouts. However, it is decisively rejected for firms with low (pre-sample) payouts (firms we expect to face financing constraints). Hem, investment is sensitive to both firm cash flow and macroeconomic credit conditions, holding constant investment opportunities. Sample splits based on firm size or maturity do not produce such distinctions. The latter comparison identifies firms where "free-cash-flow" problems might be expected to produce correlations between investment and cash flow.

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Date posted: May 31, 2004  

Suggested Citation

Hubbard, R. Glenn and Kashyap, Anil K. and Whited, Toni M., Internal Finance and Firm Investment (June 1993). NBER Working Paper No. w4392. Available at SSRN: http://ssrn.com/abstract=227017

Contact Information

Robert Glenn Hubbard (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States
HOME PAGE: http://www.gsb.columbia.edu/faculty/ghubbard

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Anil K. Kashyap
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7260 (Phone)
773 702-0458 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
773-702-7260 (Phone)
773-702-0458 (Fax)
Toni M. Whited
University of Rochester - Simon Business School ( email )
Rochester, NY 14627
United States
HOME PAGE: http://toni.marginalq.com

National Bureau of Economic Research ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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