Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67847
Authors: 
Zabojnik, Jan
Year of Publication: 
2008
Series/Report no.: 
Queen's Economics Department Working Paper 1160
Abstract: 
The corporate finance literature suggests that a financially constrained firm invests less than an identical unconstrained firm. This does not imply that financial frictions cause firms to invest less than they would in a frictionless economy. When firms compete for investment funds, an increase in financial frictions can lead individual firms to increase their investment levels. A greater than the frictionless level of investment is likely in low productivity firms, in cash-rich firms, and in firms with cheap external capital. Government programs that make capital cheaper for small firms may lead to lower levels of investment for all firms and decrease efficiency.
Subjects: 
Financial Frictions
Investment Distortions
JEL: 
E22
E44
G20
O16
Document Type: 
Working Paper

Files in This Item:
File
Size
268.03 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.