TY - JOUR
T1 - Nonlinear models in corporate finance research
T2 - review, critique, and extensions
AU - Chen, Sheng Syan
AU - Ho, Kim Wai
AU - Lee, Cheng Few
AU - Shrestha, Keshab
PY - 2004/3
Y1 - 2004/3
N2 - Since the work of Morck, Shleifer and Vishny (1988), nonlinear model specification has gained more attention in corporate finance research. In this paper, we provide a detailed review of the previous studies that have examined nonlinear relations in corporate finance. We review the theory and evidence in these studies and discuss the advantages and disadvantages of the various methodologies used to detect nonlinearity. We also suggest two possible methodological extensions, which we apply in the empirical analysis of R&D investment and firm value.
AB - Since the work of Morck, Shleifer and Vishny (1988), nonlinear model specification has gained more attention in corporate finance research. In this paper, we provide a detailed review of the previous studies that have examined nonlinear relations in corporate finance. We review the theory and evidence in these studies and discuss the advantages and disadvantages of the various methodologies used to detect nonlinearity. We also suggest two possible methodological extensions, which we apply in the empirical analysis of R&D investment and firm value.
KW - Nonlinear models
KW - Nonlinearity with interaction effect
KW - Residual analysis
UR - http://www.scopus.com/inward/record.url?scp=4043077897&partnerID=8YFLogxK
U2 - 10.1023/B:REQU.0000015854.90533.be
DO - 10.1023/B:REQU.0000015854.90533.be
M3 - Review Article
AN - SCOPUS:4043077897
SN - 0924-865X
VL - 22
SP - 141
EP - 169
JO - Review of Quantitative Finance and Accounting
JF - Review of Quantitative Finance and Accounting
IS - 2
ER -
