The Association Between Investment Opportunity Set Proxies and Realized Growth |
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Authors: | Sanjay Kallapur & Mark A Trombley |
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Institution: | Purdue Uninversity, West Lafayette, USA,;University of Arizona, Tucson, USA |
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Abstract: | Realized growth can be viewed as a proxy for the unobservable investment opportunity set (IOS) of the firm, and provides a benchmark against which IOS proxy variables can be compared. Results from such a comparison indicate that many of the variables from earlier studies, including book-to-market measures and capital expenditure to assets ratios are consistently correlated with subsequently realized growth. However, R&D intensity and E/P ratios do not exhibit any consistent association with subsequent growth indicating that they may not be valid IOS proxies. |
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Keywords: | growth investment opportunity set |
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