Average q, Marginal q, Cash Flow and Investment

Klaus Gugler, Dennis Mueller, B. Burcin Yurtoglu

Publikation: Wissenschaftliche FachzeitschriftOriginalbeitrag in FachzeitschriftBegutachtung


Many studies of the determinants of investment use Tobin's q to control for the investment <br/>opportunities of a firm. Tobin's q roughly measures the average return on a firm's capital anticipated by the market. More relevant for investment decisions, however, is the marginal return on capital. In this paper we estimate investment and R&D equations using a measure of <br/>marginal q. We use marginal q to identify the existence of cash constraints and managerial discretion, and as a separate explanatory variable. For a sample of 560 U.S. firms observed over the 1977-1996 period we present evidence confirming the existence of both cash constraints in some companies and managerial discretion in others.
Seiten (von - bis)512 - 531
FachzeitschriftSouthern Economic Journal
PublikationsstatusVeröffentlicht - 1 Aug. 2003