Not your average firm: A quantile regression approach to firm‐level investment in the United States

Abstract

A significant portion of the work published on firm investment adapts models that operate on an “average firm” assumption, which is different from the investment behavior of a modal firm. This study employs a Bayesian quantile regression model to explore the investment rates in the United States and finds, first, that the firms with higher investment rates have a higher responsiveness to the valuation ratio and lower responsiveness to the profit rate, and, second, that there is a decline in the responsiveness of firm investment to these factors in recent years. The paper also emphasizes the role of autonomous investments in determining firm‐level investment rates, based on differing sectoral factors.