118
MACROECONOMICS
firm can affect its shareholders tax liabilities by choosing
whether to retain or to distribute corporate profits. We
ignore the effect of taxes. See James M. Poterba and
Lawrence H. Summers, “Dividend Taxes, Corporate
Investment, and ‘Q’,”
Journal of Public Economics
22 (1983):
135–167.
21.
See Appendix 4.3. Of course, the solution is subject to a
transversality condition which prevents the firm’s value
from becoming infinite in finite time.
22.
See Toni M. Whited, “Debt, Liquidity Constraints, and
Corporate Investment: Evidence from Panel Data,”
Journal
of Finance
47, no. 4 (September 1992): 1425–1460. ...
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