The near‐term financial performance of capital expenditures: a managerial perspective

Abstract

Notes that although previous research has found capital expenditure to be value relevant, there has been no direct evidence that it has a positive linear association with future earnings. Uses 1976‐1989 data from a sample of US manufacturing firms to examine this link and finds that firms do not systematically invest in earnings increasing projects. Shows that firms without future losses (“winners”) had a positive association between capital expenditure and future earnings but those with losses (“losers”) had a negative one; and that if losses are excluded, capital expenditure generally gives positive information about future earnings. Considers consistency with other research, the limitations of the study and avenues for further research.

Citation

Kim, S. (2001), "The near‐term financial performance of capital expenditures: a managerial perspective", Managerial Finance, Vol. 27 No. 8, pp. 48-62. https://doi.org/10.1108/03074350110767330