Year: 2004
Type: report
Abstract: This paper studies the interaction of real and financial flexibility and their effects on firm's investment and financing decisions.We use a system of interdependent dynamic partial adjustment models to capture the effects of flexibility and feedback from firmspecific adjustments towards the optimal levels of investment and debt.The empirical analysis is based on a large panel of multinational paper and pulp companies observed between 1992 and 2002.The results suggest that the decisions and flexibilities are related, interdependent and interacting, although financial adjustment costs are likely to dominate decision-making.Profitability is found to have strongest impact on the adjustment costs, which seem to be convex and non-constant over time and across firms.
Source: Aaltodoc (Aalto University)
Authors: Ossi Lindström, Almas Heshmati
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2184149685