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Investment decisions and financial constrains: corporate governance and uncertainty

Abstract

This study aims to examine the presence of financial restrictions on investment decisions of a number of Brazilian companies in the period 1996 to 2006. The research will be done within a context of theoretical and applied, through classical and Bayesian econometric approaches. The identification of the behavior of business investment decisions within an environment of uncertainty has been a topic of great importance in the literature of the theory of investment, mainly due to its relationship with financial development and economic growth. Understanding the factors that influence and restrict these decisions it is of great importance, especially for developing economies like Brazil. In that sense, analyze how the aspects relating to corporate governance, to the structure and control of capital, to uncertainty and to the firm's classification are crucial to understand their influence on investment decisions. The analysis will be performed considering the uncertainty and the different ways to control the investment opportunities, thus isolating the effect of financial constraint. The use of a set of firms in the form of longitudinal data will consider information by firm and time varying and allow consider the heterogeneity among firms and overcome the limitations inherent in the representative firm model. The introduction of specific components of each firm in each moment of time, the regardless of the liquidity variables, the classification of firms with endogenous and exogenous multivariate techniques with issues of corporate governance will allow important conclusions with respect to the theory of investment decisions. (AU)

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