Can Capital Expenditures be Value Destroying?: An International Perspective

We look at the effect of capital expenditures on firm performance in an international context. We find that increases in capital expenditures increase ROA and Firm Q but only up to a certain point, after which value is destroyed. This is especially true for U.S. firms and continental European companies, but less so for U. K. firms over the period 2003 through 2011. Firms with high free cash flow destroy value more. In the U.S. and U.K., high free cash flow in conjunction with excessive CAPEX is value decreasing.