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Is size important for the investment-uncertainty relationship? : an empirical analyses for Dutch firms

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  • Lensink, Robert
  • Steen, Paul van
  • Sterken, Elmer

    (Groningen University)

Abstract

Abstract By using data from a survey amongst a panel of Dutch firms we investigate whether the investment-uncertainty relationship depends on the size of the firm. We find that uncertainty has a positive effect on investment of small firms, whereas it is negative for large firms. There are probably two reasons for this outcome. First, both small and large Dutch firms do not seem to be financially constrained. Second, sunk costs are much higher for large than for small Dutch firms.

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File URL: http://irs.ub.rug.nl/ppn/240329236
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Bibliographic Info

Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 00E03.

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Date of creation: 2000
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Handle: RePEc:dgr:rugsom:00e03

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  1. Hartman, Richard, 1972. "The effects of price and cost uncertainty on investment," Journal of Economic Theory, Elsevier, Elsevier, vol. 5(2), pages 258-266, October.
  2. Pindyck, Robert S. & Solimano, Andres, 1993. "Economic instability and aggregate investment," Policy Research Working Paper Series 1148, The World Bank.
  3. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 73(1), pages 228-33, March.
  4. John V. Leahy & Toni M. Whited, 1995. "The Effect of Uncertainty on Investment: Some Stylized Facts," NBER Working Papers 4986, National Bureau of Economic Research, Inc.
  5. Catherine Pattillo, 1998. "Investment, Uncertainty, and Irreversibility in Ghana," IMF Staff Papers, Palgrave Macmillan, vol. 45(3), pages 522-553, September.
  6. Pindyck, Robert S., 1990. "Irreversibility, uncertainty, and investment," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 3137-90., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  7. Peeters, Marga, 1997. "Does demand and price uncertainty affect Belgian and Spanish corporate investment?," MPRA Paper 23604, University Library of Munich, Germany.
  8. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 101(4), pages 707-27, November.
  9. Ferderer, J Peter, 1993. "The Impact of Uncertainty on Aggregate Investment Spending: An Empirical Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 25(1), pages 30-48, February.
  10. Simon Price, . "Aggregate uncertainty, investment and asymmetric adjustment in the UK manufacturing sector," Economics Discussion Papers, University of Essex, Department of Economics 441, University of Essex, Department of Economics.
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Cited by:
  1. Mark J. Koetse & Henri L.F. de Groot & Raymond J.G.M. Florax, 2006. "The Impact of Uncertainty on Investment: A Meta-Analysis," Tinbergen Institute Discussion Papers, Tinbergen Institute 06-060/3, Tinbergen Institute.
  2. K. Raabe & I. Arnold & C.J.M. Kool, 2006. "Firm size and monetary policy transmission : a theoretical model on the role of capital investment expenditures," Working Papers, Utrecht School of Economics 06-14, Utrecht School of Economics.
  3. Mark Koetse & Arno Vlist & Henri Groot, 2006. "The Impact of Perceived Expectations and Uncertainty on Firm Investment," Small Business Economics, Springer, Springer, vol. 26(4), pages 365-376, 05.

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