Tobin´s q & Corporate Investment Opportunities in Sweden - A longitudinal study

Abstract

This paper explores the impact of Tobin’s average 𝑞 as a proxy for corporate investment opportunities on the Swedish market. The study takes a longitudinal approach studying 161 firms over the period 2010–2017. Investments were calculated as growth in net property, plant and equipment. The conclusion echoes the literature in that 𝑞 is found to be significantly and positively related to the corporate investment rate. Its coefficient, in the linear regression model, is small as well as its correlation coefficient, however, pointing to a rather weak impact on investment. By further exploring the 𝑞 model and its implications on the Swedish market, this paper contributes to the already existing literature and empirical evidence concerned with Tobin’s 𝑞 as a proxy for investment opportunity. Much more research is still to be done on the Swedish market, exploring Tobin’s 𝑞 and its relationship with corporate investment.