Advanced Search
MyIDEAS: Login to save this paper or follow this series

Q-theory of Investment and Earnings Retentions - Evidence from Scandinavia

Contents:

Author Info

  • Eklund, Johan

    ()
    (Ratio Institute, JIBS and CESIS)

Abstract

In a frictionless milieu retentions should have no impact on investment behavior. However, empirical studies typically find that retentions are an important determinant of investment. Managerial discretion and financial constraints are two alternative explanations that have been suggested. This paper uses a panel of listed Scandinavian firms to examine the importance of retentions as a determinant of investment. Measures of Tobin’s Q, marginal q and sales accelerator are used to control for investment opportunities. Scandinavian firms are found to depend on retentions to a high degree, more so than in other developed economies. This high dependence on retentions suggests that the Scandinavian capital markets are suffering from allocational inefficiencies. Moreover, these market frictions appear too large to per se be caused by information asymmetries or managerial discretion phenomena. Possible institutional explanations are suggested.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: https://static.sys.kth.se/itm/wp/cesis/cesiswp157.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 157.

as in new window
Length: 39 pages
Date of creation: 03 Dec 2008
Date of revision:
Handle: RePEc:hhs:cesisp:0157

Contact details of provider:
Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Phone: +46 8 790 95 63
Web page: http://www.infra.kth.se/cesis/
More information through EDIRC

Related research

Keywords: investment; liquidity; retained earnings; free cash flow; Tobin’s Q; marginal q;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Andreas Hˆgberg, 2011. "Family Ownership and Regional Economic Development in Asia and Europe," ERSA conference papers ersa10p940, European Regional Science Association.
  2. Iuliia Naidenova & Petr Parshakov & Alexey Chmykhov, 2014. "Soccer Sponsor: Fan Or Businessman?," HSE Working papers WP BRP 28/FE/2014, National Research University Higher School of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hhs:cesisp:0157. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vardan Hovsepyan).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.