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Investment Spending in the Netherlands: Asymmetric Information or Managerial Discretion?

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  • Hans Degryse
  • Abe De Jong

Abstract

This paper examines the relation between cash-flow availability and investment spending in the Netherlands. In particular, we are interested whether managerial discretion and/or asymmetric information underpin the positive relation between cash-flow and investment spending. This relation is significantly positive for both firms with low and high investment opportunities. It is however significantly larger for firms with low investment opportunities suggesting that the managerial-discretion problem is most important in the Dutch setting. Effective corporate-governance may reduce this agency problem. Specific to the Netherlands, firms with low shareholder influence posit a higher cash-flow-investment sensitivity. The relevance of asymmetric information is confirmed as smaller firms and firms from information-sensitive industries show a larger cash-flow-investment sensitivity.

Suggested Citation

  • Hans Degryse & Abe De Jong, 2001. "Investment Spending in the Netherlands: Asymmetric Information or Managerial Discretion?," Working Papers of Department of Economics, Leuven ces0114, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:ces0114
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    Cited by:

    1. John Hutchinson & Ana Xavier, 2006. "Comparing the Impact of Credit Constraints on the Growth of SMEs in a Transition Country with an Established Market Economy," Small Business Economics, Springer, vol. 27(2), pages 169-179, October.

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