I examine whether the time-varying cost of capital is considered in firms’ capital budgeting decisions. For this test, I measure the conditional cost of equity using individual equity option prices. I find that corporate investment responds negatively to fluctuations in the option-implied cost of equity and the weighted average costs of capital. Furthermore, through decomposing marginal $ q $, I reveal that the cost-of-capital elasticity of empirical investment is almost identical to its productivity elasticity, as theory predicts. These findings suggest that firms’ discount rates are updated accurately in practice despite the failure of conventional frameworks, such as factor-based models, in this regard.

中文翻译：

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企业投资是否响应随时间变化的资本成本？经验证据

我研究了在公司的资本预算决策中是否考虑了资本的时变成本。对于这个测试，我使用单个股权期权价格来衡量股权的条件成本。我发现企业投资对期权隐含权益成本和加权平均资本成本的波动产生负面反应。此外，通过分解边缘$ q $，我揭示了经验投资的资本成本弹性几乎与理论预测的生产率弹性相同。这些发现表明，尽管传统框架（例如基于因子的模型）在这方面失败了，但在实践中公司的贴现率得到了准确的更新。