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Financial decisions and growth opportunities: a Spanish firm's panel data analysis

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  • Pablo de Andres Alonso
  • Felix J. Lopez Iturriaga
  • Juan A. Rodriguez Sanz

Abstract

This paper analyses the influence of financial leverage decisions, dividend payout policies and the ownership structure on the firm market value when companies either face, or do not face, profitable growth opportunities. A sample of 101 large non-financial publicly-traded Spanish companies is used. The results confirm the relevance of debt and dividends in terms of firm value creation by showing a negative relationship between firm value and both leverage and dividend payments in the presence of growth opportunities. On the contrary, this relationship turns out to be positive when firms have no profitable investment projects. The results also demonstrate the relevance of ownership structure in the allocation of firm resources.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 15 (2005)
Issue (Month): 6 ()
Pages: 391-407

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Handle: RePEc:taf:apfiec:v:15:y:2005:i:6:p:391-407

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Citations

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Cited by:
  1. Alessandro Fiaschi, 2009. "Managerial discretion and optimal financing policies with cash flow uncertainty," Working Papers 3, Doctoral School of Economics, Sapienza University of Rome.
  2. Bjuggren, Per-Olof & Eklund, Johan & Wiberg, Daniel, 2008. "Institutional Ownership and the Returns on Investment," Ratio Working Papers 128, The Ratio Institute.
  3. Wolfgang Drobetz & Gabrielle Wanzenried, 2006. "What determines the speed of adjustment to the target capital structure?," Applied Financial Economics, Taylor & Francis Journals, vol. 16(13), pages 941-958.
  4. San Martin-Reyna, J.M. & Duran-Encalada, Jorge A., 2012. "The relationship among family business, corporate governance and firm performance: Evidence from the Mexican stock exchange," Journal of Family Business Strategy, Elsevier, vol. 3(2), pages 106-117.
  5. Aggarwal, Raj & Zhao, Xinlei, 2007. "The leverage-value relationship puzzle: An industry effects resolution," Journal of Economics and Business, Elsevier, vol. 59(4), pages 286-297.

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