What's driving private investment in Malaysia?: aggregate trends and firm-level evidence, Issues 2006-2190
International Monetary Fund, Asia and Pacific Dept., 2006 - Business & Economics - 26 pages
Private sector investment has been a key source of growth in Malaysia over the last three decades, but after an unprecedented decline in the wake of the Asian crisis it has remained sluggish in recent years. Using aggregate and firm-level data, this paper aims to explain these trends and their implications for Malaysia's investment and growth outlook. Aggregate data point to sustained overinvestment in the years prior to the Asian crisis and the role of shifts in investor perceptions as important determinants of the recent decline in private investment. Meanwhile, firm-level data suggest that low profitability, along with financing constraints affecting smaller firms and those in the services sector, has also been important.
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accelerator effect adjustment cost function Aggregate Investment Asian crisis Asian emerging markets Asian financial crisis capital cost cash flow coefficient corporate investment corporate profitability current liabilities decline in investment dummy 25th Percentile effect of Tobin's effect on investment Exchange rate volatility factors finance investment projects financial restructuring financing constraints firm-level data fixed assets fixed capital formation fixed effects flow and liquidity following the Asian GLCs IMF staff estimates impact of sales important for investment industrial sector Interest coverage ratio internal funds investment decisions Investment Equation investment in Malaysia Korea macroeconomic main text—are presented marginal q market capitalization matter for investment measures median OECD overinvestment Pelgrin percent of GDP positive and statistically precrisis levels property sector public investment real growth real output recovery relatively Return on Assets robust covariance matrix Sample period selected variables—such services sector shift in investor statistically significant stylized facts Thailand Tobin's Q value of assets variables WorldScope