In this paper, we use firm-level survey data to explore the determinants of SME investment activity and the extent to … which observed investment is in line with that suggested by economic fundamentals. In contrast to previous literature which … has focused on whether investment gaps exist at a more aggregate level, we find evidence that for SMEs actual investment …

applied to relate their allowed revenues (revenue cap) to cost efficiency and investment. Incentive regulation varies cross … on firms’ investment. The panel data model includes common time-varying factors to control firm heterogeneity. The cross …-section dependence test is further employed to test the relationship between investment and revenue cap in different regulation regimes …