The aim of this work is to test the explanatory capacity of investments in publicly-quoted Brazilian companies using Tobin’s “q” theory. The study was carried out by means of panel data analysis, using data taken from the balance sheet and share prices on the stock exchange. The greatest difficulty with Tobin’s “q” theory is calculating the replacement cost of capital, although there are approximations that can facilitate the calculation. In this work we adopted the models proposed by Chung and Pruitt (1994) and by Lee and Tompkins (1999), because they were considered to be a simplified approximation of “q”. For these particular analyses we worked with the years 2002 to 2008, using the “q” variable in the same year as the investment, with a one period lag and squared. This work is innovative in that it provides evidence of the possibility of measuring the replacement cost of capital and, therefore, testing Tobin’s “q” theory within the Brazilian context. We concluded that it is possible to explain variations in investments by means of Tobin’s “q” theory, thereby obtaining more significant results than other analyses that used other approximations for Tobin’s “q”.
Tobin’s “q”; investment; decision; financial statements; replacement cost of capital