Investment decisions in troubled times: A Bayesian approach applied to Brazilian firms |
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Authors: | Aquiles Elie Guimares Kalatzis Carlos Roberto Azzoni |
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Institution: | aDepartment of Production Engineering, University of São Paulo, São Carlos, Av. Trabalhador São-carlense, 400, Cx.P. 359, São Carlos - SP, Brazil;bDepartment of Economics, University of São Paulo, Av. Prof. Luciano Gualberto, 908, FEA2, São Paulo - SP, Brazil |
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Abstract: | This study analyses the investment decision of 497 Brazilian firms during a period of unstable macroeconomic conditions. The role of financial constraints is considered in a Bayesian econometric model. We estimate three different models, and the results indicate the presence of financial restrictions, especially for capital-intensive firms. The recursive predictive density criterion indicates that the most preferred model is the one in which firm-specific effects are correlated with cash-flow. Financial restrictions are more important for capital-intensive firms, probably due to their lower profitability indexes, higher fixed costs and higher degree of property diversification. |
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Keywords: | Investment decisions Financial restrictions Bayesian model Capital intensity |
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