The Influence of Financial Factors on Corporate Investment

Abstract
Recent theoretical developments have shown that cash flows and the structure of a firm's balance sheet may have an important influence on investment. Establishing a link between cash flows, leverage and investment provides insights into the way that monetary policy and cyclical factors more generally influence the corporate sector. If cash flows are an important determinant of investment then changes in monetary policy (by changing interest rates) will influence investment through a cash flow effect as well as through altering the rate at which the returns to investment are discounted. If this is the case, the higher leverage of the corporate sector implies, other things being equal, that monetary policy may have a larger impact on investment than in the past .
In this article we use panel-data analysis to examine the impact of financial factors on investment decisions of firms in the Australian corporate sector. We find strong support for the influence of financial factors on investment decisions. Leverage, internally generated cash flows, and the stock of cash and liquid financial assets are all important influences on investment behaviour, particularly for smaller firms, highly leveraged firms, and firms with high retention ratios .     

A model of banknote discounts

Prior to 1863, state-chartered banks in the United States issued notes—dollar-denominated promises to pay specie to the bearer on demand. Although these notes circulated at par locally, they usually were quoted at a discount outside the local area. These discounts varied by both the location of the bank and the location where the discount was being quoted. Further, these discounts were asymmetric across locations, meaning that the discounts quoted in location A on the notes of banks in location B generally differed from the discounts quoted in location B on the notes of banks in location A. Also, discounts generally increased when banks suspended payments on their notes. In this paper we construct a random matching model to qualitatively match these facts about banknote discounts. To attempt to account for locational differences, the model has agents that come from two distinct locations. Each location also has bankers that can issue notes. Banknotes are accepted in exchange because banks are required to produce when a banknote is presented for redemption and their past actions are public information. Overall, the model delivers predictions consistent with the behavior of discounts.     

Shared values make a difference: An empirical test of corporate culture

Is the recent popular management literature on corporate culture and cultural values just a passing fad or is it highlighting some fundamental organizational realities? The results from a recent nationwide survey of American managers shows, we are convinced, that clearly articulated organizational values do make a significant difference in the lives of employees, as well as in their organization's performance. This article is an effort to integrate this broad-based data on individual managers' values with the reported experience of successful organizations that pay careful attention to their culture. It also offers ideas on how human resource managers can facilitate the alignment of personal and organizational values.     

The Progress and Poverty Centenary: Advocates and Opponents Will Enjoy and Learn from the Papers Given at One Celebration

A bstract . The Committee on Taxation. Resources and Economic Development , a group of American fiscal economists , commemorated the centenary of the publication of Henry George's classic, Progress and Poverty , with a conference reported in the book. Land Value Taxation. It raises, typically from a variety of perspectives, the major issues engendered by George's analysis and policy recommendations. Economists who are at least open-minded on George recognize him as a true progressive , a believer in the distribution of income in accordance with productive contribution and a convincing advocate of the social appropriation of economic rent on scientific and moral grounds. George was fundamentally correct in the idea that some form of land value taxation is an especially suitable mode of financing government, though the notion that this could be the single tax is and was unrealistic. The case for this as a cure for poverty is substantially exaggerated but it would remove one source of economic inequality. George, like Edward Bellamy , in promoting equality of opportunity rallied public support for the long-developing movement for pluralist economic democracy .     

No arbitrage and closure results for trading cones with transaction costs

In this paper, we consider trading with proportional transaction costs as in Schachermayer’s paper (Schachermayer in Math. Finance 14:19–48, 2004). We give a necessary and sufficient condition for , the cone of claims attainable from zero endowment, to be closed. Then we show how to define a revised set of trading prices in such a way that, firstly, the corresponding cone of claims attainable for zero endowment, , does obey the fundamental theorem of asset pricing and, secondly, if is arbitrage-free then it is the closure of . We then conclude by showing how to represent claims.