Investment, Uncertainty and Irreversibility: Evidence from Belgian Accounting Data

National Bank of Belgium Working Paper No. 23

41 Pages Posted: 18 Oct 2010

See all articles by Danny Cassimon

Danny Cassimon

University of Antwerp - Institute for Development Policy and Management

Peter-Jan Engelen

Utrecht University - School of Economics; University of Antwerp

Hilde Meersman

University of Antwerp - Department of Economics

Martine Van Wouwe

University of Antwerp - Department of Mathematics Statistics and Actuarial Sciences

Date Written: May 1, 2002

Abstract

This paper investigates the effects of uncertainty on the investment behaviour using firm-level data for a sample of Belgian manufacturing firms. In general, the results confirm former analysis at the aggregate level, stating that uncertainty does matter but that the sign of the effect and its magnitude largely depend on which proxies are used and how they are defined. It is shown that uncertainty has mainly an impact on the decision to invest and to a much lesser extent on the amount invested. Furthermore, the difference between reversible and irreversible investment is crucial. The impact of volatility on irreversible investment is far more larger than on reversible investment. In some cases, the amount of reversible investment will increase with higher volatility.

Keywords: investment, uncertainty, irreversibility

JEL Classification: D81, D92, C23

Suggested Citation

Cassimon, Danny and Engelen, Peter-Jan and Meersman, Hilde and Van Wouwe, Martine, Investment, Uncertainty and Irreversibility: Evidence from Belgian Accounting Data (May 1, 2002). National Bank of Belgium Working Paper No. 23, Available at SSRN: https://ssrn.com/abstract=1692688 or http://dx.doi.org/10.2139/ssrn.1692688

Danny Cassimon (Contact Author)

University of Antwerp - Institute for Development Policy and Management ( email )

Prinsstraat 13
Antwerpen, B-2000
Belgium

Peter-Jan Engelen

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

University of Antwerp

Hilde Meersman

University of Antwerp - Department of Economics ( email )

Prinsstraat 13
Antwerp, B-2000
Belgium

Martine Van Wouwe

University of Antwerp - Department of Mathematics Statistics and Actuarial Sciences ( email )

Prinsstraat 13
Antwerpen, B-2000
Belgium

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