The Impact of Earnings Management on Unexpected Stock Returns: Palestinian Evidence

Abdeljawad, Islam; Alia, Muiz Abu

doi:10.1007/978-3-031-08954-1_55

Cited by 8 publications

(1 citation statement)

References 22 publications

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“…As discussed earlier, previous research identified firm size, profitability, financial slack, tangibility, MB ratio and leverage as the major finance-related factors affecting investment level. These variables are measured as follows: Size is the natural logarithm of sales (Hovakimian, 2006; Abdeljawad and Alia, 2023). Tangibility is estimated as net property, plant and equipment to total assets (Rogão and Da Silva Serrasqueiro, 2023; Ghani et al , 2023a; Ngoc and Trang, 2023).…”

Section: Methodsmentioning

confidence: 99%

Financing constraints and corporate investment decision: evidence from an emerging economy

Abdeljawad,

Abu Alia,

Demaidi

2023

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Purpose Existing theories on the determining factors of corporate investment decisions raise the importance of financial market imperfections in explaining investment behavior. Many factors have been proposed as drivers of investment, mainly in developed economies, while emerging countries have almost been neglected. The main purpose of this study is to examine the effect of financing constraints on the investment behavior of a small context, namely, Jordan, with an imperfect environment. Design/methodology/approach This study considers panel data regressions from the industrial companies traded at the Amman Stock Exchange with a total of 1,058 firm-year observations. Findings The results are able to demonstrate that business size, tangibility, market-to-book ratio, profitability, financial slack and leverage are major drivers of investment choices. The results support the importance of information asymmetry in explaining the investment behavior of firms. Nonetheless, the Q-theory is in place, as is firm agility. Practical implications Policies to reduce information asymmetry are immediately needed to help firms increase investments by providing them with access to training, technology and market information. They also should enhance the firms’ opportunities for growth. Moreover, they should make it easier for businesses to access financial slack, such as by improving access to credit and financial institutions. They also can work to improve the financial infrastructure to meet the financing needs of businesses. Finally, smaller businesses should be assisted by improving their ability to invest and grow. Originality/value To the best of the authors’ knowledge, this is one of the first studies, if any, to investigate this issue in a distinct environment. Despite the unique characteristics of Jordan, the findings are applicable to other countries that experience comparable political and economic circumstances because Jordan has traits common to many emerging nations.

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