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Non-Tobin’s q in Tests for Financial Constraints to Investment

In: The Economics of Imperfect Markets

Author

Listed:
  • Sílvio Rendon

    (Stony Brook University)

Abstract

Liquidity constrained firms may be under two very well identified investment regimes, constrained and unconstrained. In this paper I derive theoretical investment equations for both regimes and discuss the consequences of ignoring the specific form of the liquidity constrained regime. I also show that expressing the investment equation as a function of Tobin’s q is by no means necessary in theory and in practice, in particular, it is not required to test for liquidity constraints.

Suggested Citation

  • Sílvio Rendon, 2010. "Non-Tobin’s q in Tests for Financial Constraints to Investment," Contributions to Economics, in: Giorgio Calcagnini & Enrico Saltari (ed.), The Economics of Imperfect Markets, chapter 0, pages 33-49, Springer.
    • Handle: RePEc:spr:conchp:978-3-7908-2131-4_2
    DOI: 10.1007/978-3-7908-2131-4_2
    as

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