Exploring nonlinearities between investment and internal funds: Evidence of the U-shaped investment curve

Karine T. Borri, Carlos Martins-Filho and Aquiles E.G. Kalatzis

Economics Letters, 2022, vol. 218, issue C

Abstract: We provide new empirical evidence of the relationship between the availability of internal funds and firms’ investment. By employing a semi-parametric fixed effect model, we estimate a U-shaped curve relating investment and internal funds. Our results highlight the importance of allowing for nonlinearities when modeling changes in internal funds and investment, and show that R&D expenses play a critical role on firms’ investment under financial constraints

Keywords: Investment decision; Financial constraints; Semi-parametric model; R&D investment (search for similar items in EconPapers)
JEL-codes: C14 C5 G3 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:218:y:2022:i:c:s0165176522002452

DOI: 10.1016/j.econlet.2022.110713

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