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 492
- Downloads 30
INVESTIGATING THE CAUSAL RELATIONSHIP BETWEEN STOCK MARKET AND AGGREGATE ECONOMIC PERFORMANCE OF SOUTH AFRICA
Stock is one of the key securities traded in the capital markets and as such, has attracted the attention of researchers. While it is said to propel economic activities, empirical studies conducted on different countries...
Assessing Determinants of Macroeconomic Policy on Real Convergence and Growth: A Comparative Study of the Eurozone and ASEAN
This study mainly examines the role of macroeconomic policy variables associated with Maastricht Convergence Criteria (MC), using various approaches to analyze comparatively differences in growth and convergence in incom...
ARE THERE LONG-TERM EFFECTS ON WAGES WHEN GRADUATING IN A BAD ECONOMY IN TAIWAN?
Entering labor market during a bad economy can be intuitively connected to worse working experience at the beginning of one?s career, and moreover, the effect would persist for many years to come. We empirically estimate...
ANALYZING FACTORS TO IMPROVE SERVICE QUALITY OF LOCAL SPECIALTIES RESTAURANTS: A COMPARISON WITH FAST FOOD RESTAURANTS IN SOUTHERN VIETNAM
The top fast food restaurant brands like KFC and MacDonald?s have gone global and demonstrated their successful business strategies through providing quick-service and convenience for customers. Meanwhile, local specialt...
CEREAL BANK AS A NECESSARY RURAL LIVELIHOOD INSTITUTE IN ARID LAND, MAKOJA VILLAGE, DODOMA-TANZANIA
In 2012, the study was carried at Makoja Village, in Semi-Arid region of Dodoma. The aim of the conducted study was to assess the importance of Cereal Bank to livelihood of farming households. A total of 80 respondents w...