Investment adjustment costs including fixed costs and quantity discounts with applications to Brazilian companies
DOI:
https://doi.org/10.1590/0101-416147457bmhKeywords:
Investment, Adjustment cost, Shadow price, Value of the firmAbstract
Investment costs are paid by organizations adjusting their productive capital stock. Those costs are hardly directly measurable, being analyzed aggregately through the value of the firm. Therefore, the goal of this work is to find equations for the investment adjustment costs using balance sheets data from Brazilian companies. Common general forms of the curves found in the literature are studied, like the quadratic relation to the investment, and equation components are proposed, including quantity discounts and fixed costs. Linear regressions are used to adapt the curves to the empirical data of companies selected from BOVESPA. Thus, it is shown that investment adjustment costs are not always explained just with the quadratic component with respect to the investments. In those cases, the adjustment costs curve is better fitted to empirical data when fixed costs and quantity discounts are considered, besides the traditional quadratic component of the investments. Finally, a simplified equation for the investment return is proposed and empirically analyzed as a function of Tobin’s q.
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Copyright (c) 2017 Bruno Miranda Henrique
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