Yang, Junhong and Alessandra, Guariglia (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.
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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.
| Item Type: | Journal Article |
|---|---|
| SOAS Departments & Centres: | Departments and Subunits > School of Finance & Management |
| ISSN: | 09291199 |
| Copyright Statement: | Copyright © 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/). |
| DOI (Digital Object Identifier): | https://doi.org/10.1016/j.jcorpfin.2015.10.006 |
| Date Deposited: | 20 Apr 2020 07:16 |
| URI: | https://eprints.soas.ac.uk/id/eprint/32624 |
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