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Investment decisions in troubled times: A Bayesian approach applied to Brazilian firms

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  • Kalatzis, Aquiles Elie Guimarães
  • Azzoni, Carlos Roberto

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 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.

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  • Kalatzis, Aquiles Elie Guimarães & Azzoni, Carlos Roberto, 2009. "Investment decisions in troubled times: A Bayesian approach applied to Brazilian firms," International Journal of Production Economics, Elsevier, vol. 120(2), pages 595-606, August.
    • Handle: RePEc:eee:proeco:v:120:y:2009:i:2:p:595-606
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    Cited by:

    1. Bassetto, Camila F. & Kalatzis, Aquiles E.G., 2011. "Financial distress, financial constraint and investment decision: Evidence from Brazil," Economic Modelling, Elsevier, vol. 28(1), pages 264-271.
    2. Aquiles Kalatzis & Aline Pellicani, Dante Mendes Aldrighi, 2019. "Family control, pyramidal ownership and investment-cash flow sensitivity: evidence from an emerging economy," Working Papers, Department of Economics 2019_12, University of São Paulo (FEA-USP).
    3. Bassetto, Camila F. & Kalatzis, Aquiles E.G., 2011. "Financial distress, financial constraint and investment decision: Evidence from Brazil," Economic Modelling, Elsevier, vol. 28(1-2), pages 264-271, January.

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    More about this item

    Keywords

    Investment decisions Financial restrictions Bayesian model Capital intensity;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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