Not your average firm: A quantile regression approach to firm-level investment in the United States

Abstract

A significant portion of the work published on firm investment adapts models that operate on an “average firm” assumption, which is different from the investment behavior of a modal firm. This study employs a Bayesian quantile regression model to explore the investment rates in the United States and finds, first, that the firms with higher investment rates have a higher responsiveness to the valuation ratio and lower responsiveness to the profit rate, and, second, that there is a decline in the responsiveness of firm investment to these factors in recent years. The paper also emphasizes the role of autonomous investments in determining firm-level investment rates, based on differing sectoral factors.