Investment Decisions in Troubled Times: a Bayesian Approach Applied to Brazilian Firms

Aquiles E. G. Kalatzis, Carlos Azzoni and Jorge A. Achcar

No 7-2005, TD NEREUS from Núcleo de Economia Regional e Urbana da Universidade de São Paulo (NEREUS)

Abstract: This study analyses the investment decision of 497 Brazilian firms during a period of unstable macroeconomic conditions. The role of financial constraints is considered in a Bayesian econometric model. We use panel data, with firm-specific information for different years. We estimate three different models, and the results indicate the presence of financial restrictions, especially for capital-intensive firms. The recursive predictive density criterion indicates that the most preferred model is the one in which firm-specific effects are correlated with cash flow. Financial restrictions are more important for capital-intensive firms, probably due to their lower profitability indexes, higher fixed costs and higher degree of property diversification.

Keywords: Investment Decisions; Financial Restrictions; Panel Data; Capital Intensity (search for similar items in EconPapers)
JEL-codes: G31 G32 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2005
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Related works:
Journal Article: Investment decisions in troubled times: A Bayesian approach applied to Brazilian firms (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:nereus:2005_007

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