We develop a valuation model of companies under financing constraints and investment time lags. Moreover, we investigate the specific time lag effect of investment on company value through Panel-VAR models using data from 622 companies listed on the Shanghai and Shenzhen stock exchanges in China from 2011–2019. The impact of cash flow and debt financing cost on company value is also dissected. The results indicate a one-period time lag effect for the investment. Cash flow is more valuable to finance-constrained companies than to non-financing constrained companies. The debt financing costs of finance-constrained companies is positively related to company value.
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Deng et al. (2022) studied this question.
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