Overview

In this book, a framework of the investment function is developed that allows for the heterogeneity of capital goods, i.e., the Multiple q model, and investment behavior in Japan by employing this Multiple q framework is developed. The standard approach to investment behavior is Tobin's q theory in which the investment rate is a linear function of only the q ratio, or a firm's market value measured by its capital goods.  As is well known, however, its empirical performance has been almost universally unsatisfactory. Thus the development of a new framework. The authors inquire into and statistically test null hypotheses set on such issues as (a) heterogeneity of multiple capital goods, (b) non-convex adjustment costs to inspire lumpy investment, (c) differences in the adjustment costs in accumulating capital stock through new purchases, second-hand market acquisitions, and large-scale repairs, and (d) capital market imperfections. The test results show that, irrespective of the time period, firms’ size, and the industry to which firms belong, (a) multiple capital goods are not homogeneous, (b) some firms face adjustment cost structures that eventually lead to occasional lumpy investment, (c) the method of acquiring investment matters in accumulating capital stock, and (d) capital market imperfections would constrain some lumpy investment. This book is published in cooperation with the Research Institute of Capital Formation, Development Bank of Japan.

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9789811529832

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Kazumi Asako is professor at the Faculty of Economics, Rissho University. His fields of interest in research are macroeconomics, empirical analysis of Japanese economy, and social common capital and environmental economics. He received a bachelor’s degree in economics at the University of Tokyo in 1974 and a Ph.D. in economics at Yale University. Jun-ichi Nakamura is general manager, Research Institute of Capital Formation, Development Bank of Japan. His fields of interest are corporate finance, financial system, corporate investment behavior, and Japanese economy. He received a bachelor’s degree in economics at Keio University in 1989, and MA in economics at the University of Tokyo in 1995. Konomi Tonogi is assistant professor at the Faculty of Economics, Rissho University. His research area is investment dynamics, intangible investment, firm value, and productivity analysis. He received BA in economics at Chuo University in 2002 and MA (2004) and Ph.D (2015) in economics at Hitotsubashi University.

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