Investments and Capital Markets Imperfections, Identification Issues: A Survey

Coric, Bruno

doi:10.2139/ssrn.1620231

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Investments and Capital Markets Imperfections, Identification Issues: A Survey

Financial Theory and Practice, Vol. 34, Issue 4, pp. 407-434.

36 Pages Posted: 5 Jun 2010 Last revised: 9 Dec 2010

See all articles by Bruno Coric

Bruno Coric

University of Split Faculty of Economics

Date Written: September 8, 2010

Abstract

If financial markets are perfect, the choice of the sources of finance does not influence investment decisions. However, financial markets are considered to be far from perfect. This review concentrates on the role of information asymmetry in determining real investment decisions. Despite the theoretical plausibility of a relationship between capital markets imperfections and real investments, the empirical literature has found it difficult to identify this channel. Overall, more research is needed to identify method which will not be subject to critiques related to the use of cash-flow in the investment equation and will be based on the data that are relatively available across countries and over time.

Keywords: Investment, asymmetric information, capital markets imperfections

JEL Classification: D53, G32, E22

Suggested Citation: Suggested Citation

Coric, Bruno, Investments and Capital Markets Imperfections, Identification Issues: A Survey (September 8, 2010). Financial Theory and Practice, Vol. 34, Issue 4, pp. 407-434., Available at SSRN: https://ssrn.com/abstract=1620231 or http://dx.doi.org/10.2139/ssrn.1620231