Details

Autor(en) / Beteiligte

• Mullins, Mark
• Wadhwani, Sushil B
• Fischer, Stanley
• Hamada, Koichi

Titel

The Effect of the Stock Market on Investment: A Comparative Study; Comments

Ist Teil von

• European economic review, 1989-05, Vol.33 (5), p.939

Ort / Verlag

Amsterdam: Elsevier Sequoia S.A

Erscheinungsjahr

1989

Quelle

Access via ScienceDirect (Elsevier)

Beschreibungen/Notizen

• It is examined whether exogenous events whose only direct effect is to change stock prices can indirectly affect corporate investment through the stock price mechanism. A modified version of the flexible capital stock adjustment model and some modified flexible accelerator investment equations are used. The actual structural effect of share price changes on investment will depend on managerial autonomy, which depends on the use of the takeover mechanism, the size of the quoted sector, gearing ratios, and the role of employees in corporate decision making. Once other influences on investment have been allowed for, share prices provide no additional explanatory power for investment behavior in Japan or Germany, but they do affect investment in the UK and US. Fischer supports this view and confirms the empirical superiority of the flexible accelerator model of investment over the more elegant Q-theory. Hamada argues that cross-section analyses may give better results than time series estimation and that the Japanese and German economies may have an advantage in overall economic performance concerning investment activities.