THE CAPITAL INVESTMENT INCREASES AND STOCK RETURNS
Journal Title: Asian Economic and Financial Review - Year 2015, Vol 5, Issue 1
Abstract
This paper applies free cash flow and information asymmetry hypotheses to investigate whether managers pursuit their private benefits by using capital investment expenditure (hereafter CI) increases or not, and to explore whether managers decrease CI as more dividend payments under information asymmetry hypothesis. Consequently, the present study investigates the effect of CI increases on abnormal stock returns of Taiwanese listed firms. The empirical results show that during full period and the post financial tsunami period, the effects of an increase in CI on stocks returns are positive, and the CI-spread is negative. This supports the hypothesis of information asymmetry. However, in the electronics industry during the entire study period and the post financial tsunami period, the expenditure of low CI tends to support free cash flow hypothesis but that of high CI supports the hypothesis of information asymmetry.
Authors and Affiliations
Jung Fang Liu| Department of Public Finance, Ling Tung University, Taiwan, Nicholas Rueilin Lee*| Department of Finance, Chaoyang University of Technology, Taiwan, Yih-Bey Lin| Department of Finance, Chaoyang University of Technology, Taiwan, Zang-Po Hong| Department of Finance, Chaoyang University of Technology, Taiwan
Keywords
Related Articles
- EP ID EP2146
- DOI -
- Views 434
- Downloads 30
EXPORT LED GROWTH OR GROWTH LED EXPORT HYPOTHESIS IN INDIA: EVIDENCE BASED ON TIME-FREQUENCY APPROACH
A plethora of research activity on the relationship between a country’s export and economic growth has produced ambiguous and mixed results. We reinvestigate this relationship using the methodology of wavelets based corr...
PERSONALITY TYPE OF INVESTORS AND PERCEPTION OF FINANCIAL INFORMATION TO MAKE DECISIONS
In this paper, it is going to understand behavior of investors of the capital market in Iran and their perceptions about financial information, which cause them to make decision to buy or sell stocks. The research was do...
Modelling Non-Interest Income at Tunisian Banks
The aim of this paper is to analyze the determinants of the non-interest income for the Tunisian context by the use of data of 10 Tunisian deposit banks. Our sample is observed during the period 1998-2009. Using panel da...
GROWING THE GROWTH OF THE GHANAIAN ECONOMY: IS THE FUNCTION OF THE COUNTRY’S FINANCIAL DEVELOPMENT OF ANY SIGNIFICANCE?
This study investigates the relationship between economic growth and financial development in Ghana, the study incorporates the variables of government expenditure, population and trade openness among others. The time sp...
EFFECTS OF EXCHANGE RATE ARRANGEMENTS ON TRADE COOPERATION IN BRICS COUNTRIES
This paper investigated the effects of imposed exchange rate arrangements on trade volume of BRICS countries. This study examined emerging economies, were consists of Brazil, Russia, India, China, and South Africa during...