Conservativism in Italian Building Firms during the Crisis

This paper aim at exploring the investment behavior of Italian building firms during the ongoing crisis. Firms investment decisions determine their debt and cash policies, and this allows to classifying them as conservative or speculative. Conservativism approach is the firm tendency to accumulate money to fund their investment using an internal source on external ones. Consequently, conservative firms could renounce investments, even profitable and affordable, to avoid indebtedness. Using a panel logit data analysis, it is checked conservativism aptitude for Italian building firms and how this phenomenon has evolved over the considered sample period. It is tested the hypothesis that the magnitude of the regressor coefficients for covariates explaining investment behavior during this period has changed. This paper is organized as follows: Section 1 introduces the existing literature about corporate finance, firm investment policies and conservativism. Section 2 describes data, methodology and the empirical framework. Section 4 shows and discuss results. Section 5 concludes.