TY  - JOUR
AU  - Hubbard,R. Glenn
AU  - Kashyap,Anil K
AU  - Whited,Toni M.
TI  - Internal Finance and Firm Investment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4392
PY  - 1995
Y2  - September 1995
UR  - http://www.nber.org/papers/w4392
L1  - http://www.nber.org/papers/w4392.pdf
N1  - Author contact info:
R. Glenn Hubbard
Graduate School of Business
Columbia University, 101 Uris Hall
3022 Broadway
New York, NY  10027
Tel: 212/854-3493
Fax: 212/864-6184
E-Mail: rgh1@columbia.edu, ws2187@columbia.edu

Anil Kashyap
Booth School of Business
University of Chicago
5807 S. Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-7260
Fax: 773/702-0458
E-Mail: anil.kashyap@chicagobooth.edu

Toni Whited
University of Rochester
William E. Simon Graduate School of Business Admin
Rochester, NY  14627
E-Mail: toni.whited@simon.rochester.edu
AB  - We examine the neoclassical investment model using a panel of U.S. manufacturing firms. The standard model with no financing constraints cannot be rejected for firms with high (pre-sample) dividend payouts. However, it is decisively rejected for firms with low (pre-sample) payouts (firms we expect to face financing constraints). Hem, investment is sensitive to both firm cash flow and macroeconomic credit conditions, holding constant investment opportunities. Sample splits based on firm size or maturity do not produce such distinctions. The latter comparison identifies firms where "free-cash-flow" problems might be expected to produce correlations between investment and cash flow.
ER  -