Overinvestment of Free Cash Flow and Manager’s Overconfidence

Moez, EL Gaied; Zgarni, Amina

doi:10.5539/ibr.v11n3p48

Cited by 7 publications

(5 citation statements)

References 38 publications

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“…Sedangkan perusahaan dengan ukuran dewan direksi yang besar jarang mengalami kondisi over-investment namun lebih cenderung under-investment. Moez & Amina (2018) mengatakan bahwa terdapat hubungan yang positif secara signifikan antara free cash flow dengan over-investment dan hubungan keduanya semakin kuat apabila direksi perusahaan bersikap over-confidence. Berdasarkan deskripsi tersebut maka dapat dinyatakan bahwa level free cash flow memperkuat pengaruh dewan direksi terhadap keputusan investasi.…”

Section: Free Cash Flow Dan Board Sizeunclassified

“…Menurut Cherkasova & Rasadi (2017) kondisi inefisiensi investasi perusahaan dapat dipengaruhi oleh earning management. Sedangkan menurut Moez & Amina (2018) penentuan nilai investasi perusahaan berhubungan erat dengan dinamika dari faktor-faktor yang sifatnya berubah-ubah yaitu seperti peluang pertumbuhan (growth opportunities) dan nilai investasi periode sebelumnya (previous investment). Pernyataan Moez & Amina (2018) tersebut memperkuat hasil penelitian Botoc & Enache (2013); Suartawan & Yasa (2017) yang menemukan bahwa potensi inefisiensi investasi dapat terjadi pada saat perusahaan memiliki nilai pertumbuhan pendapatan (sales growth) dan peluang investasi (investment opportunities) yang tinggi.…”

Section: Free Cash Flow Dan Board Sizeunclassified

See 1 more Smart Citation

Pengaruh Corporate Governance Terhadap Inefisiensi Investasi Dengan Free Cash Flow Sebagai Pemoderasi

Perdana¹,

Subagyo²

2024

Wahana

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The level of corporate investment inefficiency is closely related to the effectiveness of corporate governance practices implemented by the largest shareholders and board of directors. This paper discusses empirical research that investigates the impact of the largest shareholders and board size on investment inefficiency with free cash flow as a moderating variable. This study uses a sample of 152 public companies registered in Indonesia’s capital market for the fiscal year ended on December 31, 2014 to 2018. This study uses a multiple regression method with the Ordinary Least Square (OLS) approach. This study find that the largest shareholders and board size are significantly negative impact on investment inefficiency, but the free cash flow doesn’t moderate the influence of board size on investment inefficiency.

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Section: Free Cash Flow Dan Board Sizeunclassified

Pengaruh Corporate Governance Terhadap Inefisiensi Investasi Dengan Free Cash Flow Sebagai Pemoderasi

Perdana¹,

Subagyo²

2024

Wahana

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“…Previous studies on investment decisions concerning free cash flow and investment levels have been extensively discussed. This is related to over-and under-investment problems (Moez & Amina, 2018;Zhang, Cao, Dickinson, & Kutan, 2016). Overinvestment occurs when firms have an excess of internal funds, such as free cash flow, in which case, a positive relationship is formed between free cash flow and investment level.…”

Section: Investment and Market Valuementioning

confidence: 99%

The Market Value of Non-Family Firms: A Study on Ownership Concentrations, Financial Policy and Profitability

Muchtar¹,

Alias²,

Bensaadi³

2023

JEBIK

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This study investigates the market valuation effect of ownership concentration, financial policy and profitability in a sample of 109 non-family over the period 2012 to 2019. Hence, we used balance panel data to investigate the market value and possible effect of the variables identified using the General Method of Moment (GMM) estimator. The results market value is dynamic in nature, implying that last year's market value significantly affects the current market value. Although the major shareholders are not family members, ownership concentration still has significant negative effects on market value. However, the financial decision shows that leverage gives a positive and significant effect while investment and dividend policy seems to have a negative effect on market value, although the investment is insignificant. Lastly, profitability is positive and has significant effects. Lastly, profitability is positive and significant effects. This study concluded that ownership concentration, leverage and profitability have important factors affect market value. This study contributes to non-family firm’s literature and provides new empirical findings and policy implications of regulators to enhance the market value.JEL: G11, G30, G32.

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“…The future positive cash flows can contribute to mitigate external financing problems and increase the dividend payments. Sloan (1998) said that earning management can be used as a tool to mystify investors and to attract them to invest in overvalued stocks that can assist to augment share price (Moez & Amina, 2018). Nofsinger (2002) put forward the findings that OVERCB causes managers to underestimate the risk factor attached with cash, inventory, and account receivable.…”

Section: Literature Reviewmentioning

confidence: 99%

Behavioral Cost of Managerial Decisions Under Risk Perception and Culture: A Comparative Study Between the United States and Pakistan

2021

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The study is an attempt to find the reasons for biased behavior of overconfident managers while making financial decisions on behalf of shareholders. The study further seeks the ways to resolve the problems faced by firms due to such biased decision-making. For this purpose, quantitative research method is used to uncover the new information for better understanding of study. The comparative analysis has been done through survey-based data collected from executives/managers of firms listed on Pakistan Stock Exchange and New York Stock Exchange. The results indicate that overconfidence bias plays a significant role in managerial decisions for Pakistan compared with U.S. managers. This study applied mediation and moderation tests and found the significant mediating role of risk perception for overconfidence bias and manager decisions. The study further checked moderating role of cultural value, that is, the role of uncertainty avoidance between overconfidence bias of managers and risk perception. Hence, the role of cognitive biases and bounded rationality is undeniable for managerial decision-making and ultimate behavioral cost that firms have to pay due to undesired outcomes of situations. Consequently, this study has reached to extract the hidden facts and solutions to the observed issues for developed and emerging economy’s firms through cultural differences.

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Overinvestment of Free Cash Flow and Manager’s Overconfidence

Cited by 7 publications

References 38 publications

Pengaruh Corporate Governance Terhadap Inefisiensi Investasi Dengan Free Cash Flow Sebagai Pemoderasi

Pengaruh Corporate Governance Terhadap Inefisiensi Investasi Dengan Free Cash Flow Sebagai Pemoderasi

The Market Value of Non-Family Firms: A Study on Ownership Concentrations, Financial Policy and Profitability

Behavioral Cost of Managerial Decisions Under Risk Perception and Culture: A Comparative Study Between the United States and Pakistan

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