Is Investment-Cash Flow Sensitivity Caused by the Agency Costs or Asymmetric Information? Evidence from the UK

Pawlina, Grzegorz; Renneboog, Luc

doi:10.2139/ssrn.664981

Cited by 51 publications

(48 citation statements)

References 80 publications

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“…Perbedaan terhadap risiko dijelaskan oleh Amihud dan Lev (1981) bahwa shareholders lebih berkepentingan terhadap risiko sistematis, sedangkan manajer lebih berkepentingan terhadap risiko tidak sistematis. Pawlina dan Renneboog (2005) menjelaskan bahwa konflik ini terjadi dalam perusahaan dengan free cash flows yang besar karena manajer akan melakukan investasi atas kelebihan kas yang diperoleh dari sumber dana internal ini untuk mengoptimalkan keuntungan pribadinya dengan tidak melakukan pembayaran dividen tunai kepada pemegang saham.…”

Section: Teori Keagenanunclassified

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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Section: Teori Keagenanunclassified

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

Handriani

Irianti

2016

jeb

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“…In addition, the suppliers of credit may engage in credit rationing or reduce their stakes in a firm trying to diversify their risk by "investing" only partially in some projects (see Fazzari et al, 1987, Stiglitz and Weiss, 1981and Pawlina and Renneboog, 2005, for discussions on financing constraints issues). The setting we employ here allows for the optimal investment timing, optimal capital structure decisions and optimal/endogenous default on risky debt by equity holders.…”

Section: Introductionmentioning

confidence: 99%

Investment options with debt-financing constraints

Koussis

Martzoukos

2012

The European Journal of Finance

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Building on the Mauer and Sarker (2005) model that captures both investment flexibility and optimal capital structure and risky debt, we study the impact of debt financing constraints on firm value, the optimal timing of investment and other important variables like the credit spreads. The importance of debt financing constraints on firm value and investment policy depends largely on the relative importance of investment timing flexibility and debt financing gains. In cases where investment flexibility has high relative importance the firm can mitigate the effects of debt financing constraints by adjusting its investment policy. We show that these adjustments are non-monotonic and may create a U shape of the investment trigger as a function of the degree that debt is constrained. We show that in a reduced investment horizon, constraints have a more significant impact on firm value. We also consider managerial pre-investment risky growth options (e.g. R&D, or pilot projects). We see that they reduce the maturity effect, and (in contrast to the Brownian volatility) they tend to reduce expected credit spreads.2

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“…In addition, the empirical evidence shows that cash flow always has a signficant positive effect on accumulation, whilst the effects of the stock market evaluation and debt are mixed (Devereux and Schiantarelli, 1990;Bond and Meghir, 1994;Bond et al, 2003;Bloom et al, 2007). The mainstream investment literature argues that companies' financing issues mainly derive from agency problems, and the development of financial markets can relax these constraints (Devereux and Schiantarelli, 1990;Love, 2003;Pawlina and Renneboog, 2005;Love and Zicchino, 2006;Guariglia and Carpenter, 2008;Bond et al, 2003). In particular, Beck et al (2005) find that firms with higher financing obstacles shows slower growth, but this relationship is weaker in countries with relatively more developed financial systems.…”

Section: Accumulation Of Fixed Assets Liquidity and Financialisationmentioning

confidence: 99%

The Effects of Financialisation and Financial Development on Investment: Evidence from Firm-Level Data in Europe

Tori

Onaran²

2017

SSRN Journal

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In this paper we estimate the effects of financialization on physical investment in selected western European countries using panel data based on the balance-sheets of publicly listed non-financial companies (NFCs) supplied by Worldscope for the period 1995-2015. We find robust evidence of an adverse effect of both financial payments (interests and dividends) and financial incomes on investment in fixed assets by the NFCs. This finding is robust for both the pool of all Western European firms and single country estimations. The negative impacts of financial incomes are non-linear with respect to the companies' size: financial incomes crowd-out investment in large companies, and have a positive effect on the investment of only small, relatively more credit-constrained companies. Moreover, we find that a higher degree of financial development is associated with a stronger negative effect of financial incomes on companies' investment. This finding challenges the common wisdom on 'finance-growth nexus'. Our findings support the 'financialization thesis' that the increasing orientation of the non-financial sector towards financial activities is ultimately leading to lower physical investment, hence to stagnant or fragile growth, as well as long term stagnation in productivity. Year: 2017No: GPERC 44 GREENWICH POLITICAL ECONOMY RESEARCH CENTRE (GPERC)2

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Is Investment-Cash Flow Sensitivity Caused by the Agency Costs or Asymmetric Information? Evidence from the UK

Abstract: We

Cited by 51 publications

References 80 publications

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

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

Investment options with debt-financing constraints

The Effects of Financialisation and Financial Development on Investment: Evidence from Firm-Level Data in Europe

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