Does Hedging Financing Ensure Shareholder Value: The Case of Investment Decision
Journal Title: International Journal of Empirical Finance - Year 2014, Vol 3, Issue 5
Abstract
This paper highlights the conflicting relationship between financial governance mechanisms and financing. The choice of external financing tends to reduce manager’s flexibility because of the controls and pressures exerted by the lenders. Taking the case of investment projects financing, we will demonstrate that external financing forced managers to a rigorous selection of their projects and regular repayments and planned in advance. On the other hand, the usage of financial market financing allows them to avoid high costs of external financing by contracting derivatives guaranteeing cash regard less of the project’s quality. This financial independence may weaken the control mechanisms and encourage managers to favor their private interests by investing in projects without added value for shareholders.
Authors and Affiliations
Sami Bacha
Keywords
Related Articles
- EP ID EP27174
- DOI -
- Views 319
- Downloads 12
The Relationship between the Macroeconomic Determinants and the Profitability of Jordanian Banking System
The goal of this paper is to assess the relationship between the macroeconomic factors and banks’ revenue in the Jordanian banking system. In order to achieve this objective, it is going to analyze seven Jordanian bank...
Paucity of Funds and Small Scale Businesses in Rural Areas: Evidence from Oyo State of Nigeria
Small scale businesses occupy a place of pride in virtually every country of the world. They have been recognized to be the main engine of economic growth in developing economies like Nigeria. Despite the various benef...
Opinion Leadership and Marketing of Life Assurance in Selected Insurance Firms in Nigeria
Marketing of life assurance policies in a slow-paced moving Nigerian economy, and a sector almost ravaged by negative perception and poor consumer attitude, has over the years pose onerous task to insurance business pr...
The Extent of Competition and Its Impact on Bank Efficiency: Case of the Tunisian Commercial Banks
The increasing of banking competition has pushed worldwide banks to improve their resource allocations in order to become more competitive and efficient. The purpose of this article is to measure the level of banking c...
Managing Inflation in Nigeria: Challenges and Prospects
There appears to be a consensus that macroeconomic stability defined as low inflation is negatively related to economic growth. Hence, rapid output growth and low inflation are the most common objectives of macroeconomi...