Determinants of firms' investment behaviour : a multilevel approach
This paper investigates micro and macro determinants of firms investmentbehaviour using firm data from 101 developing and emerging economies. Asubstantial number of firms in our sample does not invest in fixed capital or investslittle relative to sales revenue. Using a multilevel probit model we study what factors trigger investment and using a multilevel Heckman selection model we study what factors influence a firms investment to sales ratio. Although we find that bothmicro and macro determinants explain investment behaviour, firms investmentbehaviour is heterogeneous in nature and has little dependency on a countrysmacroeconomic setting. In addition, we find that, on average, firms which arecompletely foreign owned have a relatively lower investment to sales ratio. Finally,we find evidence which suggests that the probability of investing is higher for firmslocated in countries with more property rights protection and control of corruptionand we find some evidence which suggests that foreign owned firms located incountries with good institutions invest relatively more.
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