scholarly journals Exploring the Role of Uncertainty for Corporate Investment Decisions in Germany

Author(s):  
Ulf von Kalckreuth
2015 ◽  
Vol 29 (4) ◽  
pp. 37-60 ◽  
Author(s):  
Ulrike Malmendier ◽  
Geoffrey Tate

In this paper, we provide a theoretical and empirical framework that allows us to synthesize and assess the burgeoning literature on CEO overconfidence. We also provide novel empirical evidence that overconfidence matters for corporate investment decisions in a framework that explicitly addresses the endogeneity of firms' financing constraints.


2018 ◽  
Vol 16 (4) ◽  
pp. 725-741
Author(s):  
Usman Muhammad ◽  
Sana Saleem ◽  
Anwar ul Haq Muhammad ◽  
Faiq Mahmood

Purpose This study aims to examine the impact of stock mispricing on corporate investment decisions by taking the sample of non-financial firms listed on the Pakistan Stock Exchange during the period of 2008-2014. Design/methodology/approach To measure the mispricing, this study decomposes the market-to-book ratio into mispricing and growth components and measures corporate investment by capital expenditures. Fixed and random effect panel regression models are used to estimate the results. Findings Results of the study show that firms issue overvalued equity to finance the capital expenditures. Consistent with other studies, the relationship between stock mispricing and investment is more prominent in the financially constrained firms. In addition, cash flow investment sensitivity is higher in financially unconstrained firms. Practical implications Nonetheless, the results give important implications to the Pakistan Stock Market on how the mispricing enhances the welfare by relaxing the financial constraints and allowing the managers to make investment in profitable projects that otherwise go non-funded. These findings have interesting implications for further research in the literature of finance and also help in economic policy-making. Originality/value This study finds the impact of stock mispricing on corporate investment decisions by considering the role of market timing in the context of Pakistan.


2015 ◽  
Vol 14 (2) ◽  
pp. 128-148 ◽  
Author(s):  
Indrarini Laksmana ◽  
Ya-wen Yang

Purpose – The study aims to examine the association between product market competition and corporate investment decisions on, particularly, risk-taking and investment efficiency. Existing theoretical studies on whether product market competition mitigates or exacerbates agency problems are inconclusive. Prior research generally finds that competition constrains management opportunism in reporting operating performance. However, the association between product market competition and managerial investment decisions has largely been unexplored. Design/methodology/approach – The primary measure of product market competition is the Herfindahl–Hirschman Index. The authors use regression analysis to examine the association between corporate risk-taking and over-investment of free cash flow (FCF) (as dependent variables) and product market competition (as an independent variable). Findings – Using firm-year observations from 1990 to 2010, the authors find that competition encourages managers to invest in risky investment. They also find that competition disciplines management on its use of FCFs. Overall, their results provide support for the disciplining role of product market competition in management investment decisions. The results are robust after they control for shareholder activism and executive compensations. Originality/value – The paper contributes to the literature by providing evidence of the disciplining role of product market competition in management investment decisions. First, the results suggest that competition encourages managers to invest in risky investment. One potential explanation for the results is that competition reduces opportunities for resource diversion for management personal benefits and, in turn, decreases management risk aversion. Another explanation is that competition forces management to take more risks for the long-term survival of the company. Second, the results indicate that competition disciplines management on its use of FCFs. Although firms in highly competitive industries make investment decisions that are less conservative, they tend to avoid suboptimal investment decisions, such as over-investment of FCF, compared to their counterparts.


2019 ◽  
Vol 8 (2) ◽  
Author(s):  
Anita Ade Rahma ◽  
Lisa Nabawi ◽  
Ronni Andri Wijaya

The purpose of this study is to analyze the role of institutional leadership, tax planning and foreign board of commissioners on firm value. The population in this study were 615 companies listed on the Indonesia Stock Exchange in 2015-2017. The sample was chosen using purposive sampling to get a total sample of 325 companies with a total of 975 observations of company data. The results of this study indicate that institutional leadership and tax planning have no role in increasing company value. While the foreign board of commissioners showed a significant influence on the value of the company. This proves that there is a need for diversity in the structure of the board that can trigger an increase in the value of the company. In addition, the presence of a foreign board is needed for the progress of the companyKeywords: Investment decisions; funding decisions; dividend policy; company value


SERIEs ◽  
2021 ◽  
Author(s):  
Daniel Dejuan-Bitria ◽  
Corinna Ghirelli

AbstractThe aim of this paper is to investigate the effect of economic policy uncertainty on firms’ investment decisions. We focus on Spain for the period 1998–2014. To measure policy-related uncertainty, we borrow the economic policy uncertainty (EPU) indicator available for this country. We find strong evidence that uncertainty reduces corporate investment. This relationship appears to be nonlinear, being the marginal effect of uncertainty attenuated toward zero during periods of high uncertainty levels. Furthermore, the heterogeneous results suggest that the adverse effect of uncertainty is particularly relevant for highly vulnerable firms. Overall, these results are consistent with the hypotheses that economic policy-related uncertainty reduces corporate investment through increases in precautionary savings or to worsening of credit conditions.


2021 ◽  
Vol 131 ◽  
pp. 102569
Author(s):  
Young Gwan Lee ◽  
Gengping Zhu ◽  
Bijay P. Sharma ◽  
Burton C. English ◽  
Seong-Hoon Cho

1994 ◽  
Vol 4 (2) ◽  
pp. 121-132 ◽  
Author(s):  
Marzio Galeotti ◽  
Fabio Schiantarelli ◽  
Fidel Jaramillo

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