In this stuJ a c'nic itodel of firm behavior is developed 'which integrates real and financial decisions.The irodel carbines the effects of capital structure and input adjustirent cxsts on the process of capital accumulation.The existence, uniqueness and stability conditions of the long-run eguilibriun and the dynamic properties of the factor demand are explored.The equations derived fran the theoretical nodel axe esthuated using firm crcessection tirre series data.The.results indicate that for both Plant and Fuiprrent (P&E) and Research and Development (R&D), the debt-eguity ratio significantly affects the investuent demands and the elasticities are highly inelastic.The effect is stronger for P&E than for R&D capital in the long run, while the effects on P&E and R&D investment are quite similar in the short run.
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