GROWTH, CORPORATE-POLICIES, AND THE INVESTMENT OPPORTUNITY SET

Gaver and Gaver take on a difficult project with their paper, and succeed in bringing insight to this important and growing area. The paper is somewhat weakened by the failure to distinguish between equity value growth and asset growth, and by a sample segmentation technique that separates firms into growth and nongrowth subsamples, and finds that the growth firms are larger and substantially more profitable. The paper also fails, as do all the papers in this area, to deal with the fundamental simultaneity between the investment opportunity set and corporate policy decisions.