The Q Theory of Investment with Private Benefits of Control, Soft Budget Constraints and Financial Constraints

Description

Yes / In this paper, we extend Tobin’s Q model under financial frictions (Hennesy, Levy, and Whited, Journal of Financial Economics (2007)), using a discrete-time version of their model, to include private benefits of control of managers and other stakeholders and soft budget constraints in the form of money injections into the firm. Managers are not viewed to maximise shareholder value, but to maximise the value of their shareholding plus their private benefits of control. Private benefits of control introduce elements of asset stripping into the model. We characterize the optimal investment policy, analyse comparative statics and discuss applications to firms in transitional economies.

Links & Downloads

1. Mykhayliv D and Zauner KG (2015) The Q Theory of Investment with Private Benefits of Control, Soft Budget Constraints and Financial Constraints. Working Paper. The Authors.
2. http://hdl.handle.net/10454/11240

Tags

Corporate governance

Q therory of investment

Financial constraints

Investment

Private benefits of control

Soft budget constraints

Additional Fields

Identifer	oai:union.ndltd.org:BRADFORD/oai:bradscholars.brad.ac.uk:10454/11240
Date	12 1900
Creators	Mykhayliv, Dariya, Zauner, K.G.
Source Sets	Bradford Scholars
Language	English
Detected Language	English
Type	Working Paper, Accepted manuscript
Rights	© 2015 The Authors. Reproduced by permission from the copyright holder.