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Does the q theory of investment work well in China?

Te-Feng Chen, Wing Chun Kwok and George Wong

Pacific-Basin Finance Journal, 2021, vol. 68, issue C

Abstract: Evidence from both the US and Chinese firm samples indicate that the R2 coefficient of the investment-q regression increases as the within-firm volatility of q increases and is larger for research-intensive industries. q explains more variations of investments in the US than in China. We find that the relatively low R2 coefficient in China can be explained by the heavy presence of state-owned enterprises and the larger measurement error of q in China.

Keywords: Investment; q theory; State-owned enterprises; Research and development (search for similar items in EconPapers)
JEL-codes: E22 G31 O33 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:68:y:2021:i:c:s0927538x21001025

DOI: 10.1016/j.pacfin.2021.101595

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