Marginal q and Firms' Capital Investments: Evidence from Time Series Data of Japanese Manufacturing Industries
In this paper, we verify the predictability of marginal q on rms' capital invest- ments. We compare Granger's causality of four manufacturing industries with the LA-VAR model and Vector Error Correction Model(VECM). We obtain the empirical results that the null hypothesis of no Granger's causality from marginal q to invest- ments is accepted for the chemical industry and iron-steel industry, and it is rejected for the transportation equipment industry. For the product machinery industry, null hypothesis is rejected with the LA-VAR model, but accepted with VECM; it is not robust result. These results indicate that the chemical and iron-steel industry, with higher uncertainty and irreversibility, could not adjust their capital investments in response to the uctuation of Tobin's q, while the transportation equipment industry could do so. Following the analytical implications by earlier theoretical studies, it is considered that uncertainty and irreversibility restrain their capital investments, or rms with uncertainty and disposal cost do not invest in equipment because of lower Tobin's q than the threshold value. Thus, the role of uncertainty and irreversibility is important for predicting capital investments by Tobin's q.
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.:
- Ogawa, Kazuo & Kitasaka, Shin-ichi & Yamaoka, Hiroshi & Iwata, Yasuharu, 1996. "Borrowing Constraints and the Role of Land Asset in Japanese Corporate Investment Decision," Journal of the Japanese and International Economies, Elsevier, vol. 10(2), pages 122-149, June.
- 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.
- Hayashi, Fumio, 1982.
"Tobin's Marginal q and Average q: A Neoclassical Interpretation,"
Econometric Society, vol. 50(1), pages 213-224, January.
- Fumio Hayashi, 1981. "Tobin's Marginal q and Average a : A Neoclassical Interpretation," Discussion Papers 457, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
When requesting a correction, please mention this item's handle: RePEc:koe:wpaper:1411. 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: (Kimiaki Shirahama)
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.