Impact of Agency Costs on Investment-cash Flow Sensitivity
Firm’s cash flow as a cheap finance source, may affect the level of investment, and high investment-cash flow sensitivity may cause investment inefficiency. The agency theory implies that managers of the firms with excess cash flow may over-invest for the purpose of private benefits. Additionally, a...
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| Autores principales: | , |
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| Formato: | article |
| Lenguaje: | FA |
| Publicado: |
Shahid Bahonar University of Kerman
2014
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| Materias: | |
| Acceso en línea: | https://doaj.org/article/ce0839d09437431ca74eec557ecd1ce8 |
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| Sumario: | Firm’s cash flow as a cheap finance source, may affect the level of investment, and high investment-cash flow sensitivity may cause investment inefficiency. The agency theory implies that managers of the firms with excess cash flow may over-invest for the purpose of private benefits. Additionally, agency costs and conflicts between managers and shareholders may lead to over/under-investment. This study investigates the impact of agency costs on investment-cash flow sensitivity. The target sample includes 103 firms listed in the Tehran Stock Exchange (TSE) during 2007 to 2011. The research takes logistic regression model to investigate the impact of agency costs on investment-cash flow sensitivity. Results show that agency costs are not the only source of inefficient investment, but could be regarded as the origin of increasing investment-cash flow sensitivity |
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