Investment Spending in the Netherlands: The Impact of Liquidity and Corporate Governance
AbstractThis paper examines the relation between cash flow, corporate governance and fixed-investment spending. In perfect capital markets we expect no systematic relationship. However, Myers and Majluf's (1984) asymmetric information hypothesis and Jensen's (1986) managerial discretion hypothesis present imperfections and predict a positive impact of cash flow on investment in fixed assets. Aspects of corporate governance play an important role in both theories. We measure the impact of cash flow on investment for a set of Dutch firms and aim to distinguish between the asymmetric information hypothesis and the managerial discretion hypothesis. Our findings show that cash flow is an important determinant of investment expenditures. The impact of cash flow is largest for firms with low growth opportunities suggesting that the managerial discretion hypothesis is most at work in the Dutch setting. We also discern that the impact of governance characteristics on both investment and the cash flow-sensitivity of investment differ between firms having low and high growth opportunities. This implies that governance affects the managerial discretion and asymmetric information hypotheses differently.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2000-24.
Date of creation: 2000
Date of revision:
Contact details of provider:
Web page: http://center.uvt.nl
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
- Pawlina, G. & Renneboog, L.D.R., 2005.
"Is Investment-Cash Flow Sensitivity Caused by the Agency Costs or Asymmetric Information? Evidence from the UK,"
2005-23, Tilburg University, Center for Economic Research.
- Pawlina, G. & Renneboog, L.D.R., 2005. "Is Investment-Cash Flow Sensitivity Caused by the Agency Costs or Asymmetric Information? Evidence from the UK," Discussion Paper 2005-001, Tilburg University, Tilburg Law and Economic Center.
- Goergen, Marc & Renneboog, Luc, 2001.
"Investment policy, internal financing and ownership concentration in the UK,"
Journal of Corporate Finance,
Elsevier, vol. 7(3), pages 257-284, September.
- Goergen, M. & Renneboog, L.D.R., 2000. "Investment Policy, Internal Financing and ownership Concentration in the UK," Discussion Paper 2000-116, Tilburg University, Center for Economic Research.
- Tomasz Mickiewicz & Natalia Isachenkova, 2003.
"Ownership Characteristics and Access to Finance: Evidence from a Survey of Large Privatised Companies in Hungary and Poland,"
35 Key words: financial c, CENTRE FOR THE STUDY OF ECONOMIC AND SOCIAL CHANGE IN EUROPE,School of Slavonic and East European Studies,University College London (SSEES,UCL).
- Natalia Isachenkova & Tomasz Mickiewicz, 2004. "Ownership Characteristics and Access to Finance: Evidence from a Survey of Large Privatised Companies in Hungary and Poland," William Davidson Institute Working Papers Series 2004-666, William Davidson Institute at the University of Michigan.
- Tomasz Mickiewicz & Kate Bishop & Urmas Varblane, 2004. "Financial Constraints in Investment - Foreign Versus Domestic Firms. Panel Data Results From Estonia, 1995-1999," William Davidson Institute Working Papers Series 2004-648, William Davidson Institute at the University of Michigan.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Corry Stuyts).
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.