Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105972
Authors: 
Schoder, Christian
Year of Publication: 
2013
Series/Report no.: 
IMK Working Paper 106
Abstract: 
The paper studies empirically how relative supply and demand conditions on the capital market affected US firm-level investment over the business cycles from 1977 to 2011. A dynamic econometric specification of capital accumulation including sales growth, Tobin's q, the cash flow-capital ratio and the cost of capital as covariates is fitted by a rolling window System GMM estimator using quarterly data on publicly traded US corporations in order to obtain time-varying coefficients. We find that the investment effects of the variables capturing the demand-side of the capital market, i.e. sales growth and Tobin's q, behave counter-cyclically, whereas this does not hold for the investment effects of supply-side variables such as cash flow or the cost of capital. Our results suggest that investment was typically driven by adverse demand rather than supply conditions on the capital market during the most severe recessions.
Subjects: 
investment
credit constraints
business cycles
panel estimation
System GMM
JEL: 
D22
E22
G32
Document Type: 
Working Paper

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