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Asymmetric Effects of Firm Investment Determinants: Evidence from Post-Transformation Economies


  • Klara Bakova

    (Department of Finance, Faculty of Business and Economics, Mendel University, Brno, Czech Republic)

  • Svatopluk Kapounek

    (Department of Finance, Faculty of Business and Economics, Mendel University, Brno, Czech Republic)


The paper investigates asymmetric effects of liquidity and profitability on the investment behavior of publicly traded firms in post-transformation economies. We show that firms in post-transformation economies face more restrictive access to external sources of funds stemming from underdeveloped capital markets. We confirm that management of firms uses free cash flow to increase firm investment activities. On the contrary, liquidity decreases do not affect investment decision making processes of firms. We also confirm positive effects of increasing profitability and negative effects of decreasing profitability on the firm investment behavior. However, our results are robust only for the firms with financial leverage reported between 1 % and 50 %. Investment behavior of over indebted firms and low indebted firms is affected mostly by aggregate economic activity.

Suggested Citation

  • Klara Bakova & Svatopluk Kapounek, 2020. "Asymmetric Effects of Firm Investment Determinants: Evidence from Post-Transformation Economies," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 70(4), pages 373-384, October.
  • Handle: RePEc:fau:fauart:v:70:y:2020:i:4:p:373-384

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    financial leverage; cash flow; profitability; post-transformation economies; Visegrad countries;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models


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