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The Cross-sectional Determinants of Corporate Capital Expenditures: A Multinational Comparison

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  • Ivo Welch

Abstract

This study predicts cross-sectional investment (capital expenditure) changes in the U.S., Canada, Great Britain, Europe, and Japan. We find that lagged stock returns are the most important cross-sectional (and positive) predictors of investment (capital expenditure) increases in all five countries. Japanese and European firms' investment may respond less to stock returns than large U.S. firms, whereas Canadian and British firms' investment may respond more to stock returns than large U.S. firms. However, the differences between the Japanese and European firms on one hand and large U.S. firms on the other hand are minor. Other predictors of capital expenditures are also examined.

Suggested Citation

  • Ivo Welch, 1994. "The Cross-sectional Determinants of Corporate Capital Expenditures: A Multinational Comparison," Finance _002, University of California at Los Angeles.
    • Handle: RePEc:wop:callfi:_002
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    Cited by:

    1. Dong, Ming & Hirshleifer, David & Teoh, Siew Hong, 2021. "Misvaluation and Corporate Inventiveness," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 56(8), pages 2605-2633, December.
    2. Caballero, Julián, 2021. "Corporate dollar debt and depreciations: All’s well that ends well?," Journal of Banking & Finance, Elsevier, vol. 130(C).
    3. Ayub, Mehar, 1998. "A simulation model of corporate finances: A study of the companies listed on Karachi stock exchange," MPRA Paper 443, University Library of Munich, Germany, revised 2001.
    4. Dow, James & Gorton, Gary, 1997. "Stock Market Efficiency and Economic Efficiency: Is There a Connection?," Journal of Finance, American Finance Association, vol. 52(3), pages 1087-1129, July.
    5. Ayub, Mehar, 2000. "Funds Flow Analysis and Determinants of Fixed Assets," MPRA Paper 363, University Library of Munich, Germany, revised 2001.

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