Asset Redeployability and the q-theory of Investment
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A key prediction of the q-theory of investment is the negative relation between corporate investment and expected return. This relation should be strong for firms that face high adjustment costs. In this study, I use the asset redeployability index of Kim and Kung (2017) as a proxy of capital adjustment costs to examine the notion about the q-theory of investment. Asset redeployability effectively captures the liquidity dimension of adjustment costs, because redeployable assets are traded more actively in secondary markets. Using publicly listed firms on the U.S. stock market, I find a strong relation between investment and return for the firms that use less redeployable assets. This empirically supports the q-theory of investment.
Abstract
A key prediction of the q-theory of investment is the negative relation between corporate investment and expected return. This relation should be strong for firms that face high adjustment costs. In this study, I use the asset redeployability index of Kim and Kung (2017) as a proxy of capital adjustment costs to examine the notion about the q-theory of investment. Asset redeployability effectively captures the liquidity dimension of adjustment costs, because redeployable assets are traded more actively in secondary markets. Using publicly listed firms on the U.S. stock market, I find a strong relation between investment and return for the firms that use less redeployable assets. This empirically supports the q-theory of investment.
참고문헌 (15)
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