Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/99217
Authors: 
Goergen, Marc
Renneboog, Luc
Year of Publication: 
2001
Citation: 
[Journal:] Vierteljahrshefte zur Wirtschaftsforschung [ISSN:] 1861-1559 [Publisher:] Duncker & Humblot [Place:] Berlin [Year:] 2001 [Volume:] 70 [Issue:] 2 [Pages:] 248-260
Abstract: 
This paper investigates whether investment spending of firms is sensitive to the availability of internal funds. Imperfect capital markets create a hierarchy for the different sources of funds such that investment and financial decisions are not independent. The relation between corporate investment and free cash flow is investigated using the Bond and Meghir (1994a) Euler-equation model for a panel of 240 companies listed on the London Stock Exchange over a 6-year period. This method allows for a direct test of the first-order condition of an intertemporal maximisation problem. It does not require the use of Tobin's q, which is subject to mis-measurement problems.
Persistent Identifier of the first edition: 
Document Type: 
Article

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