Twice constrained investment under uncertainty: A mixed time model |
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| Authors: | M Kevin McGee |
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| Institution: | 1. Servicio de Radiodiagnóstico, Sección Urgencias, Hospital Universitario Basurto, Bilbao, Vizcaya, España;2. Servicio de Radiodiagnóstico, Sección Radiología Vascular, Hospital Universitario Basurto, Bilbao, Vizcaya, España;1. Department of Economics, University of Genoa, Italy;2. Organisation for Economic Co-operation and Development (OECD), France;1. School of Economics and Management, Beijing Jiaotong University, No.3 Shangyuancun, PR China;2. School of Naval Architecture, Ocean and Civil Engineering and State Key Laboratory of Ocean Engineering, Shanghai Jiao Tong University, 800 Dongchuan Road, Shanghai, PR China;3. School of Civil & Environmental Engineering, Rutgers, The State University of New Jersey, 96 Frelinghuysen Road, Piscataway, NJ, 08854, USA;4. State Key Lab of Rail Traffic Control & Safety, Beijing Jiaotong University, No.3 Shangyuancun, PR China;5. School of Naval Architecture, Ocean and Civil Engineering, Shanghai Jiao Tong University, PR China;6. State Key Laboratory of Ocean Engineering, Shanghai Jiao Tong University, PR China;7. Collaborative Innovation Center for Advanced Ship and Deep-Sea Exploration (CISSE), PR China;1. University of Iowa, United States;2. Ohio State University, United States;3. Iowa State University, United States;4. Northeastern University, United States |
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| Abstract: | This paper explores the investment decision of a firm facing both an irreversibility constraint and a financial constraint on investment. I show that, for all but the fastest growing firms, the planned investment delaying impact of an irreversibility constraint dominates the planned investment accelerating impact of a financing constraint. This result is especially likely to hold in a reality where firms have a variety of strategies not modeled here, from holding cash reserves to taking on debt, that can mitigate the financing constraint. |
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