Investment spending and corporate governance: Evidence from the ASE listed firms
Purpose – The purpose of this paper is to present evidence on the effects that different ownership's structures of Greek listed firms exercise on the relation between investment and liquidity constraints. Design/methodology/approach – Corporate governance in Greece is primarily based on the form of family-owned firms, as in many European countries. In countries with similar corporate governance systems, a possible source of separation (in the absence of bank-controlled firms and large business groups) between management and ownership is the nationality of the companies, as foreign nationality implies the physical separation of managers and owners. A second possible separation is based on the shareholdings of the CEO when he/she bears no relation with the controlling shareholders. A sample of Athens Stock Exchange listed firms is collected and a generalized (vs a simple) model of investment is applied to test the role of corporate governance using these two basic separations of management and ownership. Findings – The paper's empirical findings support the hypothesis of asymmetric information both in the total sample and in various sub-samples. Low Q, small, and new firms under the generalized model are facing asymmetric information problems. On the other hand, low Q, old and low dividend firms are more likely to face managerial discretion problems that result in over-investment. Originality/value – This paper links information-related problems of investment with simple corporate governance structures.
Volume (Year): 36 (2010)
Issue (Month): 3 (March)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://emeraldgrouppublishing.com/products/journals/journals.htm?id=mf Email:
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.:
- Stulz, ReneM., 1988. "Managerial control of voting rights : Financing policies and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 25-54, January.
- Andrei Shleifer & Robert W. Vishny, 1996.
"A Survey of Corporate Governance,"
NBER Working Papers
5554, National Bureau of Economic Research, Inc.
- Andrei Shleifer & Robert W. Vishny, 1995. "A Survey of Corporate Governance," Harvard Institute of Economic Research Working Papers 1741, Harvard - Institute of Economic Research.
- Simon Gilchrist & Charles P. Himmelberg, 1993.
"Evidence on the role of cash flow for investment,"
Finance and Economics Discussion Series
93-7, Board of Governors of the Federal Reserve System (U.S.).
- Simon Gilchrist & Charles P. Himmelberg, 1995. "Evidence on the Role of Cash Flow for Investment," Working Papers 95-01, New York University, Leonard N. Stern School of Business, Department of Economics.
- Gilchrist, S. & Himmelberg, C.P., 1995. "Evidence on the Role of Cash Flow for Investment," Papers 95-29, Columbia - Graduate School of Business.
- Wruck, Karen Hopper, 1989. "Equity ownership concentration and firm value : Evidence from private equity financings," Journal of Financial Economics, Elsevier, vol. 23(1), pages 3-28, June.
- Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
- Hermalin, B.E. & Weisbech, M.S., 1991.
"The Effects of Board Composition and Direct Incentives on Firm Performance,"
91-02, Rochester, Business - Financial Research and Policy Studies.
- Benjamin E. Hermalin & Michael S. Weisbach, 1991. "The Effects of Board Composition and Direct Incentives on Firm Performance," Financial Management, Financial Management Association, vol. 20(4), Winter.
- Ahn, Seung C. & Schmidt, Peter, 1995. "Efficient estimation of models for dynamic panel data," Journal of Econometrics, Elsevier, vol. 68(1), pages 5-27, July.
- Blundell, Richard & Bond, Stephen, 1998.
"Initial conditions and moment restrictions in dynamic panel data models,"
Journal of Econometrics,
Elsevier, vol. 87(1), pages 115-143, August.
- R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Calem, Paul S & Rizzo, John A, 1995.
"Financing Constraints and Investment: New Evidence from Hospital Industry Data,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 27(4), pages 1002-14, November.
- Paul S. Calem & John A. Rizzo, 1994. "Financing constraints and investment: new evidence from hospital industry data," Working Papers 94-9, Federal Reserve Bank of Philadelphia.
- Kadapakkam, Palani-Rajan & Kumar, P. C. & Riddick, Leigh A., 1998. "The impact of cash flows and firm size on investment: The international evidence," Journal of Banking & Finance, Elsevier, vol. 22(3), pages 293-320, March.
- Steven N. Kaplan & Luigi Zingales, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 169-215.
- Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
- Stephen C. Vogt, 1994. "The Cash Flow/investment Relationship: Evidence from U.S. Manufacturing Firms," Financial Management, Financial Management Association, vol. 23(2), Summer.
- McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
- Oliner, Stephen D & Rudebusch, Glenn D, 1992. "Sources of the Financing Hierarchy for Business Investment," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 643-54, November.
- 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.
- Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58, pages 211.
- R. Glenn Hubbard & Anil K Kashyap & Toni M. Whited, 1993. "Internal Finance and Firm Investment," NBER Working Papers 4392, National Bureau of Economic Research, Inc.
- 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.
- Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
- Manuel Arellano & Stephen Bond, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:eme:mfipps:v:36:y:2010:i:3:p:201-224. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister)
If references are entirely missing, you can add them using this form.