Investment Behavior of Japanese Firms

In this chapter, we clarify the sample period and the summary statistics of the three constructed capital stock data sets for listed firms in Sect. 4.1. Then, after discussing the test for the homogeneity of capital goods, we verify in Sect. 4.2 the effectiveness of the Multiple q model by estimating investment functions. We attempt these estimations using the least squares (with fixed effects and random effects model) and instrumental variables methods with a particular focus on system GMM (Generalized Method of Moments). Based on the results of the homogeneity test in Sects. 4.3 and 4.4 expands the theoretical Multiple q model to a non-linear investment function by allowing non-convex, fixed investment adjustment costs. In Sect. 4.5, we estimate the non-linear investment function and discuss the implications of the estimated results. Section 4.6 concludes with several remarks.