Abstract
In this paper we develop a switching regression model of investment, in which the probability of a firm facing a high premium on external finance is endogenously determined. This approach allows one to address the potential problem of static and dynamic misclassification encountered where firms are sorted using a criteria chosen a priori. We use U.S. firm level data to analyze the effects of variables that capture each firm's credit worthiness, asymmetric information, and agency problems on the probability of being in the high- or low-premium regime. The role of macroeconomic conditions and monetary policy is also discussed. © 1998 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
Keywords
Panel dataInvestment (military)EconomicsEconometricsBusiness
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Publication Info
- Year
- 1998
- Type
- article
- Volume
- 80
- Issue
- 3
- Pages
- 466-479
- Citations
- 202
- Access
- Closed
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Cite This
Xiaoqiang Hu,
Fabio Schiantarelli
(1998).
Investment and Capital Market Imperfections: A Switching Regression Approach Using U.S. Firm Panel Data.
The Review of Economics and Statistics
, 80
(3)
, 466-479.
https://doi.org/10.1162/003465398557564
Identifiers
- DOI
- 10.1162/003465398557564