IDEAS home Printed from https://ideas.repec.org/a/asi/aeafrj/v5y2015i1p1-11id1316.html
   My bibliography  Save this article

The Capital Investment Increases and Stock Returns

Author

Listed:
  • Jung Fang Liu
  • Nicholas Rueilin Lee
  • Yih-Bey Lin
  • Zang-Po Hong

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.

Suggested Citation

  • Jung Fang Liu & Nicholas Rueilin Lee & Yih-Bey Lin & Zang-Po Hong, 2015. "The Capital Investment Increases and Stock Returns," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(1), pages 1-11.
    • Handle: RePEc:asi:aeafrj:v:5:y:2015:i:1:p:1-11:id:1316
    as

    Download full text from publisher

    File URL: https://archive.aessweb.com/index.php/5002/article/view/1316/1856
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Черкасова Виктория Артуровна & Дуняшева Регина Фаритовна, 2016. "Инвестиционные Решения Компаний В Условиях Асимметрии Информации," Higher School of Economics Economic Journal Экономический журнал Высшей школы экономики, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», vol. 20(4), pages 655-690.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:asi:aeafrj:v:5:y:2015:i:1:p:1-11:id:1316. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Robert Allen (email available below). General contact details of provider: https://archive.aessweb.com/index.php/5002/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.