The Cross-Sectional Determinants of Corporate Capital Expenditures: A Multinational Comparison

Abstract

This study predicts cross-sectional investment (asset-normalized capital expenditures) innovations within the United States, Canada, Great Britain, (mainland) Europe, and Japan. We find that lagged stock returns are the most important cross-sectional predictors of investment increases - except in mainland Europe. American firms tend to react more than Japanese firms but less than Canadian and British firms. However, the differences between Japanese firms and U.S. firms are small. In contrast, European firms appear to conduct their investment policy without much regard for their own lagged stock performance.