IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Investment, Q und Liquidity, Evidence for Germany Using Firm Level Balance Sheet Data

  • Andreas Behr

    ()

    (Universitaet Muenster)

Registered author(s):

    We analyse the investment behavior of German firms within the framework of the Q-theory. Because we use anonymous individual firm balance sheet data, no stock market measure of Q is available. The data set contains 1,342 manufacturing firms covering the period 1987 to 1998. Using the approach of Abel&Blanchard and Gilchrist&Himmelberg, a measure of Q is derived through a vector-autoregressive-model to forecast future profits directly. The estimation results of dynamic investment equations reveal that Q influences the firm's fixed investment spending significantly. When supplementing the Q-investment equation, sales influences investment significantly whereas there is no cash flow influence. Using different indicators to characterize firm's financial situation, we find no evidence of financial constraints which result in a stronger cash flow influence. While this study supports the Q-theory of investment, no evidence is found to support the effectiveness of a balance sheet channel.

    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: http://www.wiso-net.de/webcgi?START=A60&DOKV_DB=ZECO&DOKV_NO=JFNS200501001&DOKV_HS=0&PP=1
    File Function: Main text
    Download Restriction: Access via GENIOS - German Business Information - http://www.genios.de/r_startseite/index.ein

    File URL: http://search.ebscohost.com/login.aspx?direct=true&db=ecn&AN=0783335&site=ehost-live
    File Function: Main text
    Download Restriction: Access via EBSCOhost Econlit - http://www.ebscohost.com/

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

    Volume (Year): 225 (2005)
    Issue (Month): 1 (January)
    Pages: 2-21

    as
    in new window

    Handle: RePEc:jns:jbstat:v:225:y:2005:i:1:p:2-21
    Contact details of provider: Postal: Licher Straße 74, 35394 Gießen
    Phone: +49 (0)641 99 22 001
    Fax: +49 (0)641 99 22 009
    Web page: http://wiwi.uni-giessen.de/home/oekonometrie/Jahrbuecher/
    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Gilchrist, Simon & Himmelberg, Charles P., 1995. "Evidence on the role of cash flow for investment," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 541-572, December.
    2. Gertler, Mark, 1988. "Financial Structure and Aggregate Economic Activity: An Overview," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(3), pages 559-88, August.
    3. von Kalckreuth, Ulf, 2001. "Monetary transmission in Germany: New Perspectives on Financial Constraints and Investment Spending," Discussion Paper Series 1: Economic Studies 2001,19, Deutsche Bundesbank, Research Centre.
    4. Fumio Hayashi, 1997. "The Main Bank System and Corporate Investment: An Empirical Reassessment," NBER Working Papers 6172, National Bureau of Economic Research, Inc.
    5. Olivier J. Blanchard & Florencio Lopez-de-Silane, 1993. "What do Firms do with Cash Windfalls?," NBER Working Papers 4258, National Bureau of Economic Research, Inc.
    6. Andrew B. Abel & Olivier J. Blanchard, 1983. "The Present Value of Profits and Cyclical Movements in Investment," NBER Working Papers 1122, National Bureau of Economic Research, Inc.
    7. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    8. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    9. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1994. "The Financial Accelerator and the Flight to Quality," NBER Working Papers 4789, National Bureau of Economic Research, Inc.
    10. Simon Gilchrist & Charles Himmelberg, 1998. "Investment, Fundamentals and Finance," NBER Working Papers 6652, National Bureau of Economic Research, Inc.
    11. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    12. Oliner, Stephen D & Rudebusch, Glenn D, 1992. "Sources of the Financing Hierarchy for Business Investment," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 643-54, November.
    13. Behr, Andreas, 2003. "A comparison of dynamic panel data estimators: Monte Carlo evidence and an application to the investment function," Discussion Paper Series 1: Economic Studies 2003,05, Deutsche Bundesbank, Research Centre.
    14. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    15. Chirinko, Robert S & Schaller, Huntley, 1995. "Why Does Liquidity Matter in Investment Equations?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 527-48, May.
    16. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-24, January.
    17. Steven N. Kaplan & Luigi Zingales, 2000. "Investment-Cash Flow Sensitivities are not Valid Measures of Financing Constraints," NBER Working Papers 7659, National Bureau of Economic Research, Inc.
    18. Xiaoqiang Hu & Fabio Schiantarelli, 1998. "Investment And Capital Market Imperfections: A Switching Regression Approach Using U.S. Firm Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 466-479, August.
    19. Michael A. Salinger & Lawrence H. Summers, 1984. "Tax Reform and Corporate Investment: A Microeconometric Simulation Study," NBER Working Papers 0757, National Bureau of Economic Research, Inc.
    20. Audretsch, David B. & Elston, Julie Ann, 2002. "Does firm size matter? Evidence on the impact of liquidity constraints on firm investment behavior in Germany," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 1-17, January.
    21. Caballero, R.J., 1996. "Fixed Costs: The Demise of Marginal q," Working papers 96-14, Massachusetts Institute of Technology (MIT), Department of Economics.
    22. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
    23. Cable, John R, 1985. "Capital Market Information and Industrial Performance: The Role of West German Banks," Economic Journal, Royal Economic Society, vol. 95(377), pages 118-32, March.
    24. R. Glenn Hubbard & Anil K Kashyap & Toni M. Whited, 1993. "Internal Finance and Firm Investment," NBER Working Papers 4392, National Bureau of Economic Research, Inc.
    25. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 33-60, February.
    26. Timothy Erickson & Toni M. Whited, 2000. "Measurement Error and the Relationship between Investment and q," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 1027-1057, October.
    27. Cherian Samuel, 1998. "The investment decision: a re-examination of competing theories using panel data," Applied Economics, Taylor & Francis Journals, vol. 30(1), pages 95-104.
    28. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
    29. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    30. Bronwyn H. Hall & Clint Cumminq & Elizabeth S. Laderman & Joy Mundy, 1988. "The R&D Master File Documentation," NBER Technical Working Papers 0072, National Bureau of Economic Research, Inc.
    31. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    Full references (including those not matched with items on IDEAS)

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

    When requesting a correction, please mention this item's handle: RePEc:jns:jbstat:v:225:y:2005:i:1:p:2-21. 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: (Peter Winker)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.