The Investment Decision — An Empirical Study by John R. Meyer and Edwin Kuh, Harvard University Press, 1957.

In this econometric approach to the factors that influence the decisions of business to purchase plant and equipment,the authors have tested numerous investment theories in terms of empiricalevidence. Their basic statistical data

consist of financial and accounting reportsfor a five year period (1946-1950) for about six hundred American firms drawn from seventeen major industrial classifications. Through the use of regressionand correlation analysis, with crosssectiondata of individual firm observations,they seek to determine the sensitivityof investment outlay to financial considerations and to the technological relationships between capital and output. There is an emphasis on the importance of internal liquidity in the correlation patterns on depreciation and the profit and acceleration variables. Some support was found for each of the broad categoriesof investment hypotheses tested in this study but no clear evidence to justify one to the exclusion of the others. An increase in output and capital outlay will depend on many factors, including the profit motive, the market structure, the net flow of funds from current operations, and considerations of financial conservatism.Essentially the study sheds some light on the possible regularities that may be found in the investment process in terms of experiences among a limited number of large and small firms over a relatively short time period. The authors themselves are conspicuously aware of the limitations of their data and repeatedly caution against the more generalapplication of any of their conclusionsor

The book is divided into three parts. The first part consist of a brief survey of modern theories of investment. This is followed by a discussion of methods and techniques employed in the study. Part 111 is concerned with the reporting and interpretation of the actual empirical results. All the findings for each cross section model, industry, and year group are summarized for quick reference in an Appendix.