Determinants of firms' investment behaviour: a multilevel approach

Kristine Farla

Applied Economics, 2014, vol. 46, issue 34, 4231-4241

Abstract: This article investigates the determinants of firms' investment behaviour using firm data from 101 developing and emerging economies. A substantial number of firms does not invest in fixed capital or invests little 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 firm's investment-to-sales ratio. We find that firms' investment behaviour has relatively little dependency on a country's macroeconomic setting. Additionally, we find that, on average, firms that are completely foreign-owned have a relatively lower investment-to-sales ratio. Finally, we find evidence which suggests that the probability of investing is higher for firms located in countries with more control of corruption and we find some evidence which suggests that partially foreign-owned firms located in countries with relatively less corruption have a relatively higher investment-to-sales ratio.

Date: 2014
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Citations: View citations in EconPapers (15)

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Working Paper: Determinants of firms' investment behaviour: a multilevel approach (2013)
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DOI: 10.1080/00036846.2014.955167

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