Determinants of Investment in Tangible and Intangible Fixed Assets

21 Pages Posted: 6 Feb 2020

Date Written: February 5, 2020

Abstract

We investigate which firm characteristics are associated with investment in tangible and intangible fixed assets, paying special attention to the case of R&D, and which funding sources are used for each type of investment. Regarding firm characteristics, we find that younger and more profitable firms tend to invest more in all asset types. In the case of size, larger firms invest more in R&D and intangibles but less in tangible fixed assets. In addition, there is a concave relationship between leverage and investment. Regarding funding sources, we find that cash flow is the most important source of funding for intangibles and R&D, whereas financial debt is the most important funding source for tangible fixed assets. Stock issues are used to fund R&D and, especially, tangible fixed assets. Firms use cash holdings to smooth investment in R&D.

Keywords: investment, tangible fixed assets, R&D, intangibles

JEL Classification: G31, G32, O32

Suggested Citation

García-Posada, Miguel and Menéndez Pujadas, Álvaro and Mulino Rios, Maristela, Determinants of Investment in Tangible and Intangible Fixed Assets (February 5, 2020). Banco de Espana Occasional Paper No. 2004 (2020). Available at SSRN: https://ssrn.com/abstract=3532345 or http://dx.doi.org/10.2139/ssrn.3532345

Miguel García-Posada (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Álvaro Menéndez Pujadas

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Maristela Mulino Rios

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

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