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

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  • E. G. Kalatzis, Aquiles
  • R. Azzoni, Carlos

    (Departamento de Economia, Universidade de São Paulo)

  • A. Achcar, Jorge

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.

Suggested Citation

  • E. G. Kalatzis, Aquiles & R. Azzoni, Carlos & A. Achcar, Jorge, 2005. "Investment Decisions in Troubled Times: a Bayesian Approach Applied to Brazilian Firms," TD NEREUS 7-2005, Núcleo de Economia Regional e Urbana da Universidade de São Paulo (NEREUS).
    • Handle: RePEc:ris:nereus:2005_007
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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; Panel Data; Capital Intensity;
    All these keywords.

    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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