CEO’s educational background, economic policy uncertainty and investment-cash flow sensitivity: evidence from India

This study examines the association between various uncertainties and corporate investment and further investigates this association between state-owned enterprises (SOEs) and non-state-owned enterprises (non-SOEs). Moreover, this study analyzes the indirect effects of uncertainty on corporate investment through cash flow. The current research uses an unbalanced panel data of Chinese nonfinancial listed firms for the period 1999–2016. To control endogeneity issues, this study applies a robust two-step system generalized method of moments (GMM) technique to estimate the model. Empirical findings indicate that market-based and firm-specific uncertainties have positive effects, whereas economic policy and CAPM-based uncertainties have negative effects on corporate investment. Furthermore, results indicate that the effects of market-based, CAPM-based, and firm-specific uncertainties (economic policy uncertainty) were less (more) prominent for SOEs. Additional analyses show that cash flow stimulates the effect of firm-specific uncertainty on SOEs’ investment, whereas it weakens the influence of CAPM-based uncertainty (economic policy uncertainty) on investment of non-SOEs (SOEs). Moreover, cash flow attenuates the market uncertainty effect on investment.

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CEO's education and investment–cash flow sensitivity: an empirical investigation

International Journal of Managerial Finance ◽

10.1108/ijmf-01-2020-0020 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Gaurav Gupta ◽

Jitendra Mahakud ◽

Vivek Verma

Keyword(s):

Cash Flow ◽

Technical Education ◽

Generalized Method Of Moments ◽

Financial Education ◽

Educational Background ◽

Manufacturing Firms ◽

Content Type ◽

Flow Sensitivity ◽

Cash Flow Sensitivity ◽

The Impact

PurposeThe purpose of this study is to examine the impact of financial and technical education of chief executive officer (CEO) on investment–cash flow sensitivity (ICFS) of Indian manufacturing firms.Design/methodology/approachThe study uses the dynamic panel data model and more specifically, the system-generalized method of moments (GMM) technique to investigate the effect of CEOs' education on ICFS of Indian manufacturing firms during the period 1998–1999 to 2016–2017.FindingsThe study shows that financial (technical) education of CEOs does (not) affect ICFS. The results explain that the role of the CEO's education in ICFS is highly significant during the crisis period. The robustness test depicts that the influence of financial education on ICFS is less (more) for group-affiliated and large-sized firms (stand-alone and small-sized firms). Further, the CEO's education is significantly associated with corporate investment decisions.Research limitations/implicationsDue to the unavailability of the CEO's compensation data for the selected sample, future research could explore the impact of CEO's education with respect to CEO's compensation on ICFS.Practical implicationsFirst, the authors find that financially educated CEOs affect ICFS; therefore, firms should take care of CEO's education during recruitment of CEOs. Second, lending agencies should also consider the educational background of the CEO before approval of funding to make it safe. Third, investors should keep in mind the educational background of the CEO for the growth of their investment as it may be easier for financially educated CEOs to borrow from the market at the time of requirement.Originality/valueThis study contributes to the existing literature by providing empirical evidence through analyzing the impact of a CEO's education on ICFS in the context of India. This study is very unique in itself as it uses the sample of manufacturing sectors of India, which are growing very fast and attracting global investors to create a global hub of manufacturing in India. This study also considers different types of education such as financial and technical education of CEOs in the context of a developing economy like India. This study made its findings robust across company characteristics and periods based on the financial crisis.

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Economic policy uncertainty and overinvestment: evidence from Korea

Journal of Derivatives and Quantitative Studies ◽

10.1108/jdqs-05-2021-0010 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Wenwen Jiang ◽

Hwa-Sung Kim

Keyword(s):

Economic Policy ◽

Cash Flow ◽

Negative Relationship ◽

Free Cash Flow ◽

Policy Uncertainty ◽

Economic Policy Uncertainty ◽

Korean Family ◽

Significant Difference ◽

Negative Effect ◽

High Level

The authors show that there is a negative relationship between economic policy uncertainty (EPU) and firm overinvestment using Korean data from 2007 to 2016. Since Jensen (1986) shows that a firm's free cash flow is an important factor of overinvestment, the authors examine how free cash flow influences the sensitivity of overinvestment to EPU. The authors find that a high level of free cash flow attenuates the negative effect of EPU on overinvestment. The authors find that there is no significant difference in the effect of EPU on overinvestment between Chaebol (Korean family-run conglomerates) and non-Chaebol firms, which is consistent with the literature that the features of Chaebol are weakening.

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