Table 1 provides descriptive statistics on the investing and fiscal informations for the sample of the 15 listed non-financial houses during the period 2000-2009. The sample consists of houses runing in 4 different sectors. It is to be noted moreover that for the intent of the descriptive analysis, the usage of LOG was non taken into history.

Inspection of the tabular array reveals a high fluctuation of investing among the listed non fiscal houses. The mean of the ratio of investing to entire assets is 0.046, while the standard divergence is 0.072 which is about one and a half times the mean. The sample mean Tobin ‘s Q of 0.72 reflects market outlooks of rather strong growing chances for the houses. The mean of the purchase is 0.13 which suggests there is non so much trust on long term debt finance and therefore houses are non so extremely leveraged.

## 5.2 Table 5: Correlation among Independent Variables

## Investing

## Leverage

## Profitableness

## Cash Flow

## Gross saless

## James tobins Q

## Investing

1

## Leverage

-0.09

1

## Profitableness

0.29

-0.08

1

## Cash Flow

0.29

-0.07

0.85

1

## Gross saless

0.74

0.10

0.42

0.48

1

## James tobins Q

-0.07

0.18

0.09

0.12

-0.05

1

Table 3 nowadayss Correlation Coefficients for the variables used to measure the impact of purchase on house investing. Investment is negatively correlated with purchase and Tobin ‘s Q. Except for Tobin ‘s Q where a positive relationship was expected, the other variable support the theory and gives the expected consequences as the instance of purchase back uping the Agency Theory. But this negative related Tobin ‘s Q can be explained utilizing the Low and high growing houses statement. This positive relation for profitableness and concern size is consistent with the picking order theory and tradeoff theory. Cash flow? ? ?

For case, profitableness may be positively related to hard currency flows since high hard currency flows may assist in twenty-four hours to twenty-four hours running of a house ‘s concern. As seen in the above tabular array, the correlativity between profitableness and hard currency flow are high, which is 0.8489.

## Fixed or random tabular array

Table: Random and Fixed trials

## Variables

## Fixed

## Random

## Coefficient

## p-value

## Coefficient

Leverage

-0.23

0.00

-0.22

Profitableness

0.22

0.30

0.21

Cash flow

-0.30

0.25

-0.30

James tobins Q

0.57

0.04

0.42

Gross saless

0.72

0.00

0.75

R-square = 0. 5886

Prob & gt ; F = 0.0000

corr ( u_i, Xb ) = 0

No of Observation: 150

No of Company: 10

The Random Effect Model as good shows that non all variables are important. However, the value of R-squared ( R-sq ) is 0.5886. This shows that the independent variables of the current theoretical account explain 58.86 % of the investing chances of Mauritanian houses. In fixed consequence trial, purchase, Tobin’Q, gross revenues are important in explicating investing. In the random consequence theoretical account, merely purchase, and gross revenues are important.

## Table 3: Hausman Test

## Hausman

Prob & gt ; chi2 = 0.65

Harmonizing to the Hausman test the Prob & gt ; chi2=0.65 as seen in Table 3. The consequence obtained show that the random consequence theoretical account is the appropriate theoretical account to utilize. The random consequence assumes that the error term is uncorrelated with the dependent variables.

Random consequence trials

Table: Random trial

## Variables

## Coefficient

## p-value

## t-ratios

Leverage

-0.21

0.00

-9.94

Profitableness

0.14

0.03

2.15

Cash flow

-0.22

0.00

-2.78

James tobins Q

0.17

0.07

1.84

Gross saless

0.76

0.00

32.97

The consequences, shown on the Table, are instead encouraging since the significance of the overall arrested development illustrates the being of a relationship between investing chances and the determiners analysed. Apart from Tobin ‘s Q, all the other determiners are important to the theoretical account. The most interesting factor, nevertheless, is given by the fact that all of the coefficients of the exogenic variables have the predicted mark except hard currency flow which is negative.

## Leverage

Our variable of involvement, i.e. , the purchase is statistically important at 1 % and is negatively related to net investing as 1 unit addition of purchase ratio leads to a 21.43 % lessening in net investing suggesting that capital construction plays an of import function in the house ‘s investing policies. This implies that as purchase additions, houses in the sample battle to increase investing. In fact, net investing lessenings, as houses tend to go more dependent on debt as a beginning of long term funding. T

The negative consequence of purchase of house investing runs with the underinvestment and overinvestment theory and moreover, As Myers ( 1977 ) stated earlier, that purchase is negatively related to investing because of an bureau job between stockholders and bondholders. If directors work in the involvement of stockholders, they may give up some positive net nowadays value undertakings in the involvement of stockholders due to debt overhang. The theories of Jensen ( 1986 ) , Stulz ( 1990 ) and Grossman and Hart ( 1982 ) besides claimed purchase to hold a negative consequence on investing but their statements are founded on bureau jobs between directors and stockholders. They believed that houses with free hard currency flow but low growing chances may put or overinvest such that the director may take on undertakings with negative NPV. But, such scheme is non complimentary to the director, particularly if the capital market takes into history such possible self-interest or if there is a return over of the house by another company, directors tend to increase purchase and pay out hard currency as involvement and principal. Furthermore, there are direct costs involved in raising external support, such as underwriting and administrative fees. There is besides possible fiscal hurt costs associated with utilizing external finance. For illustration, as purchase additions, other things being equal, there may be a higher chance of the house confronting fiscal hurt. In this instance, the house may incur direct bankruptcy costs such as legal disbursals and legal guardian fees and indirect costs such as the break of operations, loss of providers or clients and the infliction of fiscal restraints. The present value of these expected costs should be reflected in current funding costs. Finally, there are issues of revenue enhancement, stockholder dilution, control of information, the demand to keep flexibleness and liquidness that may besides hold an impact on a house ‘s funding picks. Fiscal factors may therefore impact the cost and handiness of capital and so act upon the investing determination

## Profitableness

The coefficient for profitableness is 13.79 which is statistically important at 3.1 % and is positively related to investing. It indicates that the operating efficiency of the entire financess over investings is positive. Normally, high profitableness besides attracts financess from investors for enlargement and growing. Furthermore, it contributes towards the societal operating expenses for the public assistance of the society and there is an effectual usage of capital. This consequence is consistent with the empirical literature whereby Myres, 1984 stated that houses prefer to finance new investings from retained net incomes and raise debt capital merely if the former is deficient, the handiness of internal capital depends on the profitableness of the house. This fact is in line with the picking order theory

## Cash Flow

From the consequences obtained from table above, it can be noted that hard currency flow is important at 1 % but it is negatively related to investing chances since as 1 unit addition of hard currency flow ratio leads to a 22.47 lessening in net investing. The overall negative and important coefficient of hard currency flow suggests that overinvestment is severed in overinvesting houses if they hold more hard currency. Harmonizing to Jensen ( 1986 ) as the free hard currency flows of overinvesting directors addition, so should the overinvestment, as they have more financess to blow

The contradicting and statistically weak consequence might be explained by the fact that hard currency retentions for the support of undertakings are of comparatively small relevancy to the studied group of houses, since the studied houses should hold favourable entree to external capital by being listed. Therefore, the houses might fund their undertakings straight by portion or debt issues, alternatively of constructing hard currency militias. Possessing free hard currency flow is instead good for a house, but holding inordinate hibernating hard currency flow is comparatively is non good.

When free hard currency flow is present and shareholding monitoring is uncomplete, the typical manager-shareholder monitoring bureau job arises. Directors have a inclination to overinvest even in negative NPV undertakings while stockholders would prefer dividends to extinguish the free hard currency flow. Cash flow is instead used possibly for paying out dividend, debt-finance portion redemption, and the similar.

As argued by Whited ( 1992 ) , Gomes ( 2001 ) , Alti ( 2003 ) , Cummins et Al. ( 2006 ) among others, one of import cautiousness in the analysis that might explicate the contradictory findings in the literature is that hard currency flow might convey information about the house ‘s future investing chances. When this is the instance, a important hard currency flow and investing relationship might be observed that reflects increased investing chances instead than signalling funding clashs. In other words, the ascertained relation between hard currency flow and investing might be a specious consequence ensuing from the inability to command for investing chances in the implicit in investing equation.

The investing of houses with higher purchase may be more sensitive to hard currency flows than that of houses with lower purchase. The increased debt service duties ensuing from higher purchase mean that the available hard currency flows of higher-geared houses are smaller and therefore they have less of a buffer against perturbations.

## Gross saless

It can be seen that houses are using their entire assets expeditiously and it reflects the ability in bring forthing big gross revenues volume. The estimations of gross revenues is 75.94 and the variable is statistically important at 1 % . Gross saless gross does non back up the popular belief that house with more debt are puting to a lesser grade than their gross revenues would propose.

This determination corresponds to that of Kopcke and Howrey ( 1994 ) who found that investing of 396 companies was non dependent on the gross revenues gross of the houses.

## Tobin ‘s Q

From the tabular array, it can be seen that Tobin ‘s Q is statistically undistinguished at 6.5 % and is positively related with investing. The arrested development estimation is 17.44. Firms which have a leaning to spread out the graduated table of the concern and direction ‘s ability to transport out such a policy is constrained by the handiness of free hard currency flows and this restraint can be farther tightened via fiscal purchase. The issue of debt engages the house to pay hard currency as involvement and principal, coercing the directors to serve such committednesss with the financess that may hold otherwise been allocated for investing undertakings.

Hayashi ( 1982 ) explained that the Tobin ‘s Q variable should be an equal plenty variable to explicate steadfast investing. However, if a major impact of Tobin ‘s Q is the presence of “ bubbles, ” signifiers of unreason such as herding and other factors, so it might non be a statistic that captures the relevant information about profitableness of undertakings invested in. In add-on, he assumes that the market is to the full efficient, the house exhibits changeless returns to scale and significantly, these houses have no market power.

HIGH AND LOW GROWTH Firm

## Arrellano and Bond Test

## Table: Arrellano and Bond

## Variables

## Coefficient

## p-value

## t-ratios

Investmentlag

-0.18

0.79

-0.26

Leverage

0.04

0.82

0.23

Profitableness

-0.33

0.94

-0.07

Cash flow

0.50

0.91

0.11

James tobins Q

0.73

0.78

0.27

Gross saless

0.06

0.97

0.04

## The GMM consequences show that investing slowdown is non important. There is no causality in investing.

## Sargan Trials

## Sargan

p-value: 1.000

The p-value is above the 0.05. It indicates that the theoretical account is valid. The theoretical account passes the sargan trial.

## Abond trial

## abond

p-value

Order 1

Order 2

0.79

0.26

The p-value for both of Order 1 and Order 2 is greater than 0.05. There is no grounds of consecutive correlativity in the dataset.