NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Xioaji Lin

University of Minnesota
Carlson School of Management
321 19th Ave S.
Minneapolis, MN 55445

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NBER Working Papers and Publications

August 2013Investment, Tobin's q, and Interest Rates
with Chong Wang, Neng Wang, Jinqiang Yang: w19327
We study the impact of stochastic interest rates and capital illiquidity on investment and firm value by incorporating a widely used arbitrage-free term structure model of interest rates into a standard q theoretic framework. Our generalized q model informs us to use corporate credit-risk information to predict investments when empirical measurement issues of Tobin’s average q are significant (e.g., equity is much more likely to be mis-priced than debt), as in Philippon (2009). We find, consistent with our theory, that credit spreads and bond q have significant predictive powers on micro-level and aggregate investments corroborating the recent empirical work of Gilchrist and Zakrajšek (2012). We also show that the quantitative effects of the stochastic interest rates and capital illiquidit...

Published: Xiaoji Lin & Chong Wang & Neng Wang & Jinqiang Yang, 2018. "Investment, Tobin’s q, and interest rates," Journal of Financial Economics, vol 130(3), pages 620-640. citation courtesy of

 
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