The determinants of maintenance expenditures in chemical companies

Maintenance expenditures represent more than net profits of several manufacturing companies. Maintenance costs are easy to reduce in a year simply by deferring maintenance activities. Examines maintenance expenditures of US chemical companies from 1975 to 1991. Uses a nonlinear model based on seemingly unrelated regression analysis to identify various factors that influence the expenditures. Uses the ratios of maintenance spending to cost of property, plant and equipment, and buildings (gross plant), cost of property, plant and equipment, and buildings minus accumulated depreciation (net plant) and cost of goods sold as dependent variables. Shows that the age of property, plant and equipment, and buildings, company size, and return on assets have significant influence on the maintenance expenditures. The leverage ratios adversely affect the ratios of maintenance costs to gross plant and net plant.