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I show that firms' ability to adjust variable capital in response to productivity shocks has important implications for the interpretation of the widely documented investment-cash flow sensitivities. The variable capital

I show that firms' ability to adjust variable capital in response to productivity shocks has important implications for the interpretation of the widely documented investment-cash flow sensitivities. The variable capital adjustment is sufficient for firms to capture small variations in profitability, but when the revision in profitability is relatively large, limited substitutability between the factors of production may call for fixed capital investment.

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    Date Created
    • 2013
    Resource Type
  • Text
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    Note
    • Partial requirement for: Ph. D., Arizona State University, 2013
      Note type
      thesis
    • Includes bibliographical references (p. 62-66)
      Note type
      bibliography
    • Field of study: Business administration

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    by Kirak Kim

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