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Investment cash flow sensitivity constitutes one important block of the corporate financial literature. While it is well documented in standard corporate finance, it is still young under behavioral corporate finance. In this paper, we test the investment cash flow sensitivity among panel data of American industrial firms during 1999-2010. Using Q-model of investment (Tobin, 1969), we construct and introduce a proxy of managerial optimism following Malmendier and Tate (2005a) to show the impact of CEOs' optimism in the relationship between investment and internal cash flow. Our results report a positive and significant coefficient of investment to cash flow for the full sample. While, on estimations of our model using sub-sample of more and less constrained firms, we find that the sensitivity exists stronger only for totally constrained group. We find also that board characteristics can reduce investment policy's distortions. [ABSTRACT FROM AUTHOR]

I analyze manager and venture capitalist bargaining over the financial contract in the face of double-sided moral hazard problems. The allocation of cash flows depends on the combined effects of value-added services, reputation seeking, and bargaining power. Welfare is maximized when the venture capitalist has high value-adding capabilities, the market for reputation is informationally efficient, and the manager has bargaining power. Furthermore, I consider the effect of exit strategies on the financial agreement. I also consider bidding between venture capitalists of differing abilities. Generally, the superior venture capitalist wins with a lower bid, but in some cases the inferior venture capitalist can win. [ABSTRACT FROM AUTHOR]