Discussion Paper Details

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Title: Enterprise Investment During the Transition: Evidence from Czech Panel Data

Author(s): Lubomír Lízal and Jan Svejnar

Publication Date: March 1998

Keyword(s): Czech Republic, Firms, Investment, Ownership and Transition

Programme Area(s): Transition Economics

Abstract: We analyse investment behaviour of the population of medium and large industrial firms located in the Czech Republic in 1992?5. We examine the relevance of alternative models of investment and test if investment behaviour varies across ownership-legal form categories of firms. By using a large panel of quarterly observations, we eliminate biases introduced by data aggregation and selectivity, reduce measurement error, take into account heterogeneity across firms and over time, and control for the significant seasonal variation in investment. The data indicate that foreign-owned companies invest the most and cooperatives the least. Contrary to earlier survey findings, our large data set does not support the hypothesis that private firms invest more than state-owned ones. Our econometric tests suggest that, except for cooperatives and smaller private firms, the behaviour of firms is better approximated by the neoclassical/accelerator model than cash flow or financing constraint theories. The data also fit quite precisely a dynamic structural model of investment for a profit-maximizing firm.

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Bibliographic Reference

Lízal, L and Svejnar, J. 1998. 'Enterprise Investment During the Transition: Evidence from Czech Panel Data'. London, Centre for Economic Policy Research.