We study the effects of monetary-policy-induced changes in Tobin's q on corporate investment and capital structure. We develop a theory of the mechanism, provide empirical evidence, evaluate the ability of the quantitative theory to match the evidence, and quantify the relevance for monetary transmission to aggregate investment.
We thank Sebastian Fanelli and Pascal Paul for their useful discussions of an early version of the paper. Jeenas acknowledges financial support from the Juan de la Cierva - Formacion Grant (FJC2019-041561) by the Spanish Ministry of Science, Innovation, and Universities, and from the Spanish Ministry of Economy and Competitiveness, through the Severo Ochoa Programme for Centres of Excellence in R\&D (CEX2019-000915-S). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.