Investment and the cost of capital : new evidence from the corporate bond market / Simon Gilchrist, Egon Zakrajsek
- Author
- Gilchrist, Simon
- Published
- Cambridge, Mass. : National Bureau of Economic Research, [2007]
- Copyright Date
- ©2007
- Physical Description
- 40 pages : illustrations ; 22 cm.
- Additional Creators
- Zakrajšek, Egon and National Bureau of Economic Research
Online Version
- www.nber.org , Click here to download PDF file
- Series
- Summary
- "We study the effect of variation in interest rates on investment spending, employing a large panel data set that links yields on outstanding corporate bonds to the issuer income and balance sheet statements. The bond price data -- based on trades in the secondary market -- enable us to construct a firm-specific measure of the user cost of capital based on the marginal cost of external finance as determined in the market for long-term corporate debt. Our results imply a robust and quantitatively important effect of the user cost of capital on the firm-level investment decisions. According to our estimates, a 1 percentage point increase in the user cost of capital implies a reduction in the investment rate of 50 to 75 basis points and, in the long run, a 1 percent reduction in the stock of capital."--abstract.
- Subject(s)
- Note
- "June 2007."
- Bibliography Note
- Includes bibliographical references (pages 33-35).
- Other Forms
- Also available in PDF from the NBER World Wide Web site (www.nber.org).
View MARC record | catkey: 3866087