Investment opportunities, free cash flow and market reaction to international joint ventures

Chen, Sheng‐Syan; Ho, Kwok Ki; Lee, Cheng-Few; Yeo, Gillian Hian Heng

doi:10.1016/s0378-4266(99)00103-x

Cited by 50 publications

(44 citation statements)

References 36 publications

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“…This means the presence or absence of investment opportunities that are owned by the company had no direct effect on stock price changes. This result is contrary to research findings from Kaestner and Liu (1998) and Chen et al (2000). This can be explained that detailed information about the investment opportunity set is usually owned by management.…”

Section: Methodscontrasting

confidence: 92%

Study on Dividend Policy: Antecedent and its Impact on Share Price

Murhadi

2010

SSRN Journal

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Research BackgroundDividend announcement by a company is a signal to shareholders. Basically, managers and shareholders have different information, where managers have more complete information than shareholders. The shareholders will interpret the increase in dividend payments by the company, as the signal that management has a high cash flow forecast future (Black, 1976). Conversely, the decline in dividend payments interpreted as anticipation manager of the limited cash flow in the future. Lintner (1956) advocated the view that firms increase dividend payments only if the manager believes that these high dividend payments can be maintained in the future. ThisCreate PDF with GO2PDF for free, if you wish to remove this line, click here to buy Virtual PDF Printer 2 research was continued by Fama and Babiak (1968) showed support for the model developed by Lintner. Bhattacharya (1979) and Miller and Rock (1985) predicts that the dividend payment announcement containing information about the condition of cash flow that is in good company for current and future (Allen and Michaely, 2002).The study discusses the direct relationship between dividends and stock prices have been a lot done, but the results are still ambiguous (Jensen and Smith, 1984).Miller and Modigliani (1961)-hereinafter referred to as MM-argued that the assumption of perfect markets, rational behavior and perfect certainty, find the relationship that the value of the company and the current dividend policy is irrelevant. MM Research ignore that there is information that is not the same between the parties to a transaction. In fact, there is informational asymmetry, where the parties conducting the sales have more information about the company's condition compared to the potential investors. The presence of different information will encourage the role of dividends as a signal to outsiders (Dong, Robinson and Veld, 2005). Absence of significant influence of the dividend was also raised by Black and Scholes (1974). Meanwhile, Litzenberger and Ramaswamy (1979) in his research to include the finding that dividend taxes have a negative effect on stock price movements. This is because the tax on dividends is higher than the taxes imposed on capital gains, and tax on capital gains realized only when the transaction (Brigham and Daves, 2002). Bajaj and Vijh (1990) states that the impact of dividend changes on stock prices is large and the impact of dividend yield are stronger in small firms. On the other hand, Ammihud and Li (2002) Create PDF with GO2PDF for free, if you wish to remove this line, click here to buy Virtual PDF Printer (1984) states that it is difficult to explain the effect of dividend policy on stock price movements in isolation.In this research further discussed antecedents of dividend policy and its impact on stock prices. In addition to dividends, to examine other factors that influence stock prices, among others, is the investment opportunity set (Miller and Modigliani, 1961;Myers, 1977;Lang and Litzenberger, 1989;H...

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Section: Methodscontrasting

confidence: 92%

Study on Dividend Policy: Antecedent and its Impact on Share Price

Murhadi

2010

SSRN Journal

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“…Beberapa penelitian yang telah dilakukan sebelumnya (Myers 1977;Kallapur dan Trombley 1999, 2001Gaver dan Gaver 1993;Smitt dan Watts 1992;Abed et al, 2011;Chen et al, 2000) menyatakan bahwa investment opportunity set (IOS) digunakan sebagai proksi keputusan investasi, karena keputusan investasi tidak dapat diamati secara langsung. IOS sebagai variabel laten tidak dapat diukur secara langsung, sehingga perlu dibentuk atau dikonfirmasi dengan berbagai variabel terukur.…”

Section: H3unclassified

Investment Opportunity Set (IOS) Berbasis Pertumbuhan Perusahaan dan Kaitannya Dengan Upaya Peningkatan Nilai Perusahaan

Handriani

Irianti

2016

jeb

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This research aims to develop theoretical approach to complete the conceptual controversy regarding the research results on the investment Keywords: investment opportunity set (IOS), dividend pay out ratio (DPR), firm value PENDAHULUANTujuan operasional perusahaan secara umum adalah untuk memaksimalkan kekayaan dan kesejahteraan pemegang saham. Hal ini bisa dicapai dengan berbagai upaya yaitu melalui keputusan penggunaan profit untuk pembayaran deviden, kesempatan investasi atau investment opportunity set (IOS) dan kebijakan pendanaan.Menurut Jiambalvo dan Rajgopal (2002), harga saham, IOS dan keputusan pendanaan mencerminkan nilai perusahaannya. Harga transaksi yang terjadi antara penjual dan pembeli berdasarkan nilai perusahaan ini sesungguhnya disebut nilai pasar perusahaan. Nilai pasar perusahaan ini yang nantinya akan memunculkan 83

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“…Following the Internalization Theory (Buckley/Casson 1976, Teece 1977, Hennart 1982) and the Eclectic Theory (Dunning 1979(Dunning , 1988, competitive advantages which allow a firm to overcome the liability of foreignness are those derived from intangible assets accrued by the investing firm in its own home country. 2 The empirical evidence provided in relation to this issue (Morck/Yeung 1992, Chen et al 2000 has confirmed that stock market reaction to FDIs is influenced by the investing firm's degree of accumulation of intangible assets. When the FDI is made by means of an acquisition, valuable intangible assets increase the potential to obtain benefits from the bidder's resources, once these are combined with those of the target firm.…”

Section: Who: the Investing Firmmentioning

confidence: 99%

“…However, the bulk of previous research has focused on the performance consequences of FDI for firm's shareholders -for example by using event study techniques (Brown/Warner 1985, McWilliams/Siegel 1997 to quantify the stock market reaction to internationalization decisions. Most of these studies confirm that a positive stock market reaction -in other words, positive abnormal returns 1 -to a FDI only takes place when the investing firm enjoys good investment opportunities and has important intangible assets to help it overcome the liability of foreignness (Morck/Yeung 1992, Chen et al 2000.…”

Section: Introductionmentioning

confidence: 97%

Stock market reaction to foreign direct investments: Interaction between entry mode and FDI attributes

López-Duarte

Canal

2007

MANAGE. INT. REV.

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and Key Results■ What is the expected reaction regarding the stock price of companies which carry out FDIs (Foreign Direct Investments)? Results from previous research focusing on specific entry modes are inconclusive.■ The aim of this paper is to test whether the stock market reaction to FDIs is dependent not only on the entry mode that the investing firm may have chosen, but also on the interaction between the entry mode and the other FDIs' attributes.■ By focusing on the recent international expansion by means of FDIs of listed Spanish firms, we have found that stock market reaction to FDIs depends upon the interaction between the entry mode and the location of the investment, the identity of the investor and the latter's international experience.

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Investment opportunities, free cash flow and market reaction to international joint ventures

Cited by 50 publications

References 36 publications

Study on Dividend Policy: Antecedent and its Impact on Share Price

Study on Dividend Policy: Antecedent and its Impact on Share Price

Investment Opportunity Set (IOS) Berbasis Pertumbuhan Perusahaan dan Kaitannya Dengan Upaya Peningkatan Nilai Perusahaan

Stock market reaction to foreign direct investments: Interaction between entry mode and FDI attributes

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