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An Analytic Framework For Interpreting Investment Regressions In The Presence Of Financial Constraints / Andrew B. Abel, Stavros Panageas.
- Format:
- Book
- Author/Creator:
- Abel, Andrew B.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w26898.
- NBER working paper series no. w26898
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2020.
- Summary:
- A financial constraint that prevents access to external funds induces non-classical measurement error in average q as a proxy for unobservable marginal q. Unlike classical measurement error, this measurement error biases upward the coefficient on average q in a univariate regression of investment on average q. In a multiple regression of investment on average q and cash flow, the coefficient on cash flow is positive. The positive cash-flow coefficient indicates the presence of a financial constraint, but it does not indicate a shortage of liquidity to fund current investment. In addition, the coefficient on average q is biased downward.
- Notes:
- Print version record
- March 2020.
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