Guariglia, A. and Yang, J. (2016) A balancing act: managing financial constraints and agency costs to minimize investment inefficiency in the Chinese market. Journal of Corporate Finance, 36. pp. 111-130. ISSN 1872-6313
Abstract
Using a large panel of Chinese listed firms over the period 1998–2014, we document strong evidence of investment inefficiency, which we explain through a combination of financing constraints and agency problems. Specifically, we argue that firms with cash flow below (above) their optimal level tend to under- (over-)invest as a consequence of financial constraints (agency costs). Furthermore, focusing on under-investing firms, we highlight that the sensitivities of abnormal investment to free cash flow rise with traditionally used measures of financing constraints, while for over-investing firms, the sensitivities increase with a wide range of firm-specific measures of agency costs.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2016 Elsevier B.V. This is an author produced version of a paper subsequently published in Journal of Corporate Finance. Uploaded in accordance with the publisher's self-archiving policy. Article available under the terms of the CC-BY-NC-ND licence (https://creativecommons.org/licenses/by-nc-nd/4.0/) |
Keywords: | Under-investment; Over-investment; Free cash flow; Financial constraints; Agency costs; China |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Management School (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 07 Dec 2015 16:08 |
Last Modified: | 20 Oct 2018 00:38 |
Published Version: | http://dx.doi.org/10.1016/j.jcorpfin.2015.10.006 |
Status: | Published |
Publisher: | Elsevier |
Refereed: | Yes |
Identification Number: | 10.1016/j.jcorpfin.2015.10.006 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:92587 |