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Author: | Inci, A.C. Lee, B.S. Suh, J. |
Title: | Capital investment and earnings: international evidence |
Journal: | Corporate governance
2009 : SEP, VOL. 17:5, p. 526545 |
Index terms: | corporate governance capital investment earnings legal systems development |
Freeterms: | financial development |
Language: | eng |
Abstract: | This article investigates the nature of the dynamic link between earnings and capital investment. To do this, it makes use of firm-level data from 40 countries around the world over the period of 1988-2004 to determine whether the legal environment and financial development are important in the profitability of capital investment. The results show that the causality from earnings to capital investment is positive regardless of the legal system or the degree of financial development of the country. However, when the causality is into the opposite direction, the legal system and financial development play a larger role. Implications for practitioners and policy makers are presented. |
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