@techreport{Tomat2007Modeling,
abstract = {The paper develops a model of firm\textasciiacute{}s investment under uncertainty with financial market imperfections and analyzes the effects of financial constraints on firm\textasciiacute{}s investment. Firm\textasciiacute{}s investment is an increasing function of the firm\textasciiacute{}s marginal q, however the investment function is characterized by an upper bound that depends on the firm\textasciiacute{}s borrowing capabilities. The firm\textasciiacute{}s marginal q is the sum of the expected value of the marginal profitability of the physical capital stock and of a positive external finance premium. In the presence of financial market imperfections the firm forms expectations about future financial conditions and these expectations raise the firm\textasciiacute{}s current marginal q. Similarly, the shadow price of firm\textasciiacute{}s debt is the sum of the interest cost of debt repayment and of a provision for external finance that depends on the firm\textasciiacute{}s expectations over future financial conditions.},
address = {Kiel},
author = {Gian Maria Tomat},
copyright = {http://creativecommons.org/licenses/by-nc/2.0/de/deed.en},
keywords = {E22; D92; 330; firm\textasciiacute{}s investment; financial constraints; Tobin\textasciiacute{}s marginal q; uncertainty},
language = {eng},
number = {2007-38},
publisher = {Kiel Institute for the World Economy (IfW)},
title = {Modeling the Effects of Financial Constraints on Firm\textasciiacute{}s Investment},
type = {Economics Discussion Papers / Institut f\"{u}r Weltwirtschaft},
url = {http://hdl.handle.net/10419/17961},
year = {2007}
}
