Investment behaviour under financial constraints: a study of Indian firms

Ghosh, Debarati; Dutta, Meghna

doi:10.1007/s43546-021-00113-1

Cited by 9 publications

(3 citation statements)

References 34 publications

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“…4.6 Role of growth opportunities, financial constraints and business bankruptcy firms Investors may react differently to firms with low growth opportunities, high financial constraints and higher probability of bankruptcy. For example, studies (Belderbos et al, 2019;Liu and Wang, 2021) suggest that firms with high growth opportunities, financial constraints (Denis and Sibilkov, 2010;Ghosh and Dutta, 2021) and stressed firms (Sajid et al, 2016;Triani and Tarmidi, 2019) are less likely to make alternative investments. Therefore, one may argue that the negative association between CRE investment and firm performance is determined by low growth opportunities, high financial constraints and more distressed firms.…”

Section: Alternative Measures Of Corporate Real Estate Investmentsmentioning

confidence: 99%

Corporate real estate investment and firm performance: empirical evidence from listed non financial firms of Pakistan

Naz

Bhutta

Sheikh

et al. 2023

JCRE

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Purpose This study aims at testing the relationship between corporate real estate (CRE) investment and firm performance of nonfinancial firms in the context of an underdeveloped market, Pakistan. Design/methodology/approach This study uses a sample of 307 nonfinancial firms listed at the Pakistan Stock Exchange from 2010 to 2020. This study adopts a rigorous methodological approach and employs ordinary least square, fixed effect, generalized method of moments system regressions and the propensity score matching technique to account for potential heteroskedasticity, effects of unobserved variables and endogeneity. Findings This study finds that as the investment in CRE increases, the firm’s performance decreases. The findings are robust to alternative proxies of CRE investment and alternative methodologies. Furthermore, the findings hold for financially constrained and financially unconstrained firms, high- and low-growth firms and safe and financially distressed firms. Research limitations/implications This study extends the evidence about CRE investment in an underdeveloped market and suggests potential avenues for future research. Practical implications The findings of this study warrant investors, managers and directors be cautious about CRE investment in firms. Originality/value This study uses a new proxy of CRE investment, which is more inclined toward the asset management and financial perspective of CRE investment. Furthermore, to the best of the authors’ knowledge, this is the first attempt to investigate the role of CRE investment in an underdeveloped market.

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Section: Alternative Measures Of Corporate Real Estate Investmentsmentioning

confidence: 99%

Corporate real estate investment and firm performance: empirical evidence from listed non financial firms of Pakistan

Naz

Bhutta

Sheikh

et al. 2023

JCRE

View full text Add to dashboard Cite

show abstract

“…The investment opportunities are a set of feasible investment projects that a firm can undertake given its resources and constraints. It may also be referred to as a set of profitable projects that a firm can undertake with its available resources (Debarati & Dutta, 2021). These investment opportunities are influenced by a firm's financial constraints, which are the limitations on the firm's ability to raise external funds due to information asymmetry, agency costs, or market imperfections (Yacine & Khan, 2013).…”

Section: Environmental Uncertainty Corporate Esg Performance and Inve...mentioning

confidence: 99%

How uncertainty can determine corporate ESG performance?

Bin‐Feng,

Mirza,

Ahsan

et al. 2023

Corp Soc Responsibility Env

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Using Sino‐Securities Environmental, social, and governance (ESG) ratings data, we examine how environmental uncertainty affects the ESG performance of Chinese A‐share non‐financial listed firms from 2008 to 2020. Our findings show that environmental uncertainty harms corporate ESG performance. In particular, when environmental uncertainty increases, a firm's ESG score and ESG ratings decline due to factors such as financial constraints and industry competition. We argue that as the environmental risk premium rises, it increases the real options value of postponing sustainable investment for a firm. Consequently, the firms tend to cut down their ESG investment by weighing the long‐term benefits and short‐term direct costs. The value of real options changes with the investment opportunities available to the firms and the financing constraints and competitive pressure changes the size of investment opportunities. We argue that higher financing constraints and industry competition restrict available investment opportunities and dilute the negative impact of environmental uncertainty on corporate ESG performance. These results add to the existing literature investigating the impact of uncertainty on corporate ESG performance and offer insights to regulators and enterprise managers. These results are robust to alternate proxies of ESG performance and alternate regression techniques.

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“…A nancially distressed rm satis es three simple conditions: negative growth in the average market value; its income from operations is less than its nancial expenses; and its operating cash ow is less than its nancial expenses (Gupta & Chaudhry, 2018). Research has shown that nancially distressed companies' investment decisions are more sensitive to cash ow (Ghosh & Dutta, 2021). This implies that nancial distress is associated with declining pro ts or increasing losses, operating cash ow snags, and a general decline in rm market value.…”

Section: Financial Distressmentioning

confidence: 99%

Correlation between Earnings Management and Financial Distress among Selected Firms in Kenya

Kamau

Banafa

Kariuki

2022

Preprint

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Background This paper evaluates the link between earnings management and financial distress among listed firms in Kenya. Earnings management is the use of accounting practices to prepare financial statements that portray a company's business activity and financial status in an unrealistically favorable manner. On the other hand, financial distress is when an organization's revenues or income no longer satisfy its financial obligations, resulting in bankruptcy and possible dissolution. Results The assessment compares the modified Jones score, which is commonly used to measure discretionary accruals, with Altman’s Z score, which measures the degree of financial distress. The earnings management and financial distress. The selected firms under this study are known to be financially distressed as per the publicly available information. The hypothesis tests express whether a correlation exists between earnings management and financial distress. The result also highlights the level of significance of the effect of earnings management on financial distress. Conclusion The study concludes that there is some moderate probability that a financially distressed firm is likely to practice earnings management. On the other hand, there is a moderate likelihood that firms that practice earnings management may face financial distress at some point. Earnings management is not necessarily practiced to camouflage financial distress, but that does not mean that it cannot happen. On the other hand, financial distress is not an indicator of earnings management and vice versa.

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Investment behaviour under financial constraints: a study of Indian firms

Cited by 9 publications

References 34 publications

Corporate real estate investment and firm performance: empirical evidence from listed non financial firms of Pakistan

Corporate real estate investment and firm performance: empirical evidence from listed non financial firms of Pakistan

How uncertainty can determine corporate ESG performance?

Correlation between Earnings Management and Financial Distress among Selected Firms in Kenya

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