Estimating Nonlinear Investment-q Relation in the Presence of Measurement Error

We study a nonlinear relationship between corporate investment and Tobin’s q in the cross-section. After correcting for nonseparable measurement error in q with the aid of repeated measurement, we find evidence of heterogeneity in the investment-q relation. The investment-q sensitivity is little for firms with low and high q. On the other hand, the relationship is most sensitive to intermediate values of q. In the cross-section, the true investment-q relation is thus not thoroughly linear, and investments are rather clustered at both ends of q

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Year of publication:	2023
Authors:	Song, Suyong ; Wee, Hyunbok
Publisher:	[S.l.] : SSRN
Subject:	Statistischer Fehler \| Statistical error \| Schätztheorie \| Estimation theory \| Nichtlineare Regression \| Nonlinear regression

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