IDEAS home Printed from https://ideas.repec.org/a/taf/japsta/v38y2011i2p287-299.html
   My bibliography  Save this article

Multicollinearity and financial constraint in investment decisions: a Bayesian generalized ridge regression

Author

Listed:
  • Aquiles E.G. Kalatzis
  • Camila F. Bassetto
  • Carlos R. Azzoni

Abstract

This paper addresses the investment decisions considering the presence of financial constraints of 373 large Brazilian firms from 1997 to 2004, using panel data. A Bayesian econometric model was used considering ridge regression for multicollinearity problems among the variables in the model. Prior distributions are assumed for the parameters, classifying the model into random or fixed effects. We used a Bayesian approach to estimate the parameters, considering normal and Student t distributions for the error and assumed that the initial values for the lagged dependent variable are not fixed, but generated by a random process. The recursive predictive density criterion was used for model comparisons. Twenty models were tested and the results indicated that multicollinearity does influence the value of the estimated parameters. Controlling for capital intensity, financial constraints are found to be more important for capital-intensive firms, probably due to their lower profitability indexes, higher fixed costs and higher degree of property diversification.

Suggested Citation

  • Aquiles E.G. Kalatzis & Camila F. Bassetto & Carlos R. Azzoni, 2011. "Multicollinearity and financial constraint in investment decisions: a Bayesian generalized ridge regression," Journal of Applied Statistics, Taylor & Francis Journals, vol. 38(2), pages 287-299, September.
    • Handle: RePEc:taf:japsta:v:38:y:2011:i:2:p:287-299
    DOI: 10.1080/02664760903406462
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/02664760903406462
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/02664760903406462?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Haddad, Eduardo & Mena-Chalco, Jesús & Sidone, Otávio, 2015. "Scholarly Collaboration in Regional Science in Developing Countries: The Case of the Brazilian REAL Network," TD NEREUS 4-2015, Núcleo de Economia Regional e Urbana da Universidade de São Paulo (NEREUS).
    2. Zhi-Sheng Ye & Jian-Guo Li & Mengru Zhang, 2014. "Application of ridge regression and factor analysis in design and production of alloy wheels," Journal of Applied Statistics, Taylor & Francis Journals, vol. 41(7), pages 1436-1452, July.
    3. Eduardo A. Haddad & Jesús P. Mena-Chalco & Otávio J. G. Sidone, 2017. "Scholarly Collaboration in Regional Science in Developing Countries," International Regional Science Review, , vol. 40(5), pages 500-529, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:japsta:v:38:y:2011:i:2:p:287-299. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CJAS20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.