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The influence of governance on investment: Evidence from a hazard model

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  • Billett, Matthew T.
  • Garfinkel, Jon A.
  • Jiang, Yi
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    Abstract

    Does corporate governance affect the timing of large investment projects? Hazard model estimates suggest strong shareholder governance may deter managers from pursuing large investments. Controlling for investment opportunities, firms with good governance experience longer spells between large investments. However, in the presence of financial constraints or strong CEO incentives (high delta (δ)), we find no such timing differences. Finally, these higher investment hazard firms exhibit significantly negative long-run operating and stock performance. Overall, our findings are consistent with the notion that poor governance associates with overinvestment.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 102 (2011)
    Issue (Month): 3 ()
    Pages: 643-670

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    Handle: RePEc:eee:jfinec:v:102:y:2011:i:3:p:643-670

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Corporate governance; Investment spike; Hazard model;

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    Cited by:
    1. Andreou, Panayiotis C. & Louca, Christodoulos & Panayides, Photis M., 2014. "Corporate governance, financial management decisions and firm performance: Evidence from the maritime industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 63(C), pages 59-78.

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