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The Cross-Sectional Determinants Of Corporate Capital Expenditures: A Multinational Comparison

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  • Ivo Welch
  • David Wessels

Abstract

This study predicts cross-sectional investment (asset-normalized capital expenditures) innovations within the United States, Canada, Great Britain, (mainland) Europe, and Japan. We find that lagged stock returns are the most important cross-sectional predictors of investment increases – except in mainland Europe. American firms tend to react more than Japanese firms but less than Canadian and British firms. However, the differences between Japanese firms and U.S. firms are small. In contrast, European firms appear to conduct their investment policy without much regard for their own lagged stock performance.

Suggested Citation

  • Ivo Welch & David Wessels, 2000. "The Cross-Sectional Determinants Of Corporate Capital Expenditures: A Multinational Comparison," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 52(2), pages 103-136, April.
    • Handle: RePEc:sbr:abstra:v:52:y:2000:i:2:p:103-136
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    Cited by:

    1. Dong, Ming & Hirshleifer, David & Teoh, Siew Hong, 2021. "Misvaluation and Corporate Inventiveness," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 56(8), pages 2605-2633, December.
    2. Caballero, Julián, 2021. "Corporate dollar debt and depreciations: All’s well that ends well?," Journal of Banking & Finance, Elsevier, vol. 130(C).
    3. Ayub, Mehar, 1998. "A simulation model of corporate finances: A study of the companies listed on Karachi stock exchange," MPRA Paper 443, University Library of Munich, Germany, revised 2001.
    4. Dow, James & Gorton, Gary, 1997. "Stock Market Efficiency and Economic Efficiency: Is There a Connection?," Journal of Finance, American Finance Association, vol. 52(3), pages 1087-1129, July.
    5. Ayub, Mehar, 2000. "Funds Flow Analysis and Determinants of Fixed Assets," MPRA Paper 363, University Library of Munich, Germany, revised 2001.

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