Journal article
Bias-Corrected Nonlinear Investment- q Relation in the Cross Section of Firms
The Review of Corporate Finance Studies
04/17/2026
DOI: 10.1093/rcfs/cfag010
Abstract
We study a nonlinear relationship between corporate investment and Tobin’s q in the cross section of firms. After correcting for nonlinear errors using a repeated measurement of q derived from analysts’ forecasts, we find evidence of varying investment-q sensitivity across firms. The investment-q sensitivity is low for firms with low q. It then becomes more pronounced at intermediate values before weakening at high values of q, resulting in an S-shaped pattern. In the cross section, the true investment-q relation is therefore not strictly linear. Firm investment is predicted to remain similar among firms with low q, suggesting that increases in q do not necessarily lead firms to increase investment significantly. (JEL C21, C26, E22, G31)
Details
- Title: Subtitle
- Bias-Corrected Nonlinear Investment- q Relation in the Cross Section of Firms
- Creators
- Suyong Song - University of IowaHyunbok Wee - Tulane University
- Resource Type
- Journal article
- Publication Details
- The Review of Corporate Finance Studies
- DOI
- 10.1093/rcfs/cfag010
- ISSN
- 2046-9128
- eISSN
- 2046-9136
- Publisher
- Oxford University Press
- Language
- English
- Electronic publication date
- 04/17/2026
- Academic Unit
- Economics; Finance
- Record Identifier
- 9985157605602771
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