The Review of Economics and Statistics Vol. 80 No. 3 1998
Investment and Capital Market Imperfections: A Switching Regression Approach Using U.S. Firm Panel Data
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.
- DOI
- 10.1162/003465398557564
- Volume
- 80
- Issue
- 3
- Pages
- 466-479
- Language
- en
- Sources
- openalex crossref