Financial Constraints, Mispricing and Corporate Investment

Chang, Xin; Faff, Robert W.; Kwok, Wing Chun; Wong, George

doi:10.2139/ssrn.1101361

Cited by 2 publications

(3 citation statements)

References 70 publications

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“…The more investment in such projects will ultimately results in more loss which will affect the future stock returns of the firm. Other researcher like (Baker and Wurgler, 2002;Chan et al, 2006;Wong et al, 2009;Cooper et al, 2008;Gilchrist et al, 2005;Panageas, 2005;Polk and Sapienza, 2009;Sloan, 1996;Titman et al, 2004) also documented same results, whereas (Wang et al, 2009) didn't find a significant relationship between market valuation and investment. The result of control variable reveals that Tobin's q is positive and significant while size and cash flow remained insignificant in Model II.…”

Section: Methodsmentioning

confidence: 64%

“…Polk and Sapienza (2009) by using discretionary accrual as a proxy for mispricing also found that it is positively affecting firm's investment. Other researchers such as (Baker et al, 2003;Wong et al, 2009;Gilchrist et al, 2005;Shleifer and Vishny, 2003) also confirm the same effect of mispricing on investment. Haque and Sarwar (2013) found that discretionary accrual has a significant and positive effect on Pakistani stock returns which implies that managers manipulate earning to misinform investors which consequently overvalue the firm's stock.…”

Section: Methodsmentioning

confidence: 64%

“…The impact of financial market mispricing and financial constraints in investments on 2116 US manufacturing firms during 1971-2004 was studied by Wong et al (2009). They classified the firms into financially constrained and unconstrained firms.…”

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

Mispricing, Corporate Investment and Stock Returns: Evidence from Pakistani Stock Market

Haque¹,

Naeem²

2016

RJASET

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The present study empirically investigates the impact of stock mispricing (i.e., overvaluation or undervaluation of stocks) on corporate investment decision of firms. Mispricing in stocks is measured by discretionary accruals while corporate investment is measured by change in fixed tangible assets. A sample of 386 non financial firms listed on Karachi stock exchange during the period 1998-2011 is analyzed in the study. Fixed effect model is employed for estimation purposes. Congruent with existing literature, the results reveal that discretionary accrual has positive and significant effect on the corporate investment. Furthermore, the impact of the higher investment is investigated on future stock returns of the firm and it is observed that the resultant higher investment ultimately leads to lower subsequent stock returns. The study therefore, concludes that mispricing of stock returns will result in higher investments which would have its adverse effects on their future stock prices.

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Section: Methodsmentioning

confidence: 64%

Section: Methodsmentioning

confidence: 64%

See 1 more Smart Citation

Mispricing, Corporate Investment and Stock Returns: Evidence from Pakistani Stock Market

Haque¹,

Naeem²

2016

RJASET

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Internal Financial Constraints, External Financial Constraints and Investment Choice: Evidence From Pakistani Firms

Azam¹,

Shah²

2012

AJBMR

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The purpose of this study is to analyze the impact of internal and external financial constraints on investment choice. The data have been taken from 9 major sectors (52 listed firms in the Karachi Stock Exchange) namely; Pharmaceutical & Bio Technology, Textile, Sugar, Tobacco, Chemicals, Oil and Gas, Fixed line Telecommunication, Industrial metal and Mining, and Cement sectors for the time period 2004 to 2010 on annual basis. Multiple regression analysis has been done to examine the relationship among firm’s size, dividend payout ratio, firm’s age, and investment. The empirical findings show that there is positive relationship between the firms’ size and investment while a negative relationship exists between firms’ age and investment. It also reports that there is negative relationship between dividend payout ratio and the investment. This shows that if a firm grows old or high dividend payout ratio then it will tend to spend less for expansion as compared to the young firms.

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Financial Constraints, Mispricing and Corporate Investment

Cited by 2 publications

References 70 publications

Mispricing, Corporate Investment and Stock Returns: Evidence from Pakistani Stock Market

Mispricing, Corporate Investment and Stock Returns: Evidence from Pakistani Stock Market

Internal Financial Constraints, External Financial Constraints and Investment Choice: Evidence From Pakistani Firms

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