Overinvestment, Underinvestment, Efficient Investment Decrease, and Efficient Investment Increase

Hairong Tang, Yuqing Shen and Yao-Min Chiang

International Journal of Asian Social Science, 2014, vol. 4, issue 6, 752-766

Abstract: Using data of Chinese listed companies, we find that the relationship between capital expenditure growth and stock return does not monotonously increase or decrease. Four types of relationships exist between capital expenditure growth and stock returns: overinvestment, underinvestment, efficient investment decrease, and efficient investment increase. The first two types show inefficient investments, whereas the last two types show efficient investments. We further explore how ownership structure in Chinese listed companies affects the relationship between capital expenditure growth and stock return. We find that companies controlled by private investors tend to make inefficient investment decisions because of agency problems.

Keywords: Ownership structure; Overinvestment; Underinvestment; Stock return; Asset growth rate; Capital expenditure. (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

Downloads: (external link)
https://archive.aessweb.com/index.php/5007/article/view/2675/4061 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:asi:ijoass:v:4:y:2014:i:6:p:752-766:id:2675

Access Statistics for this article

More articles in International Journal of Asian Social Science from Asian Economic and Social Society
Bibliographic data for series maintained by Robert Allen ().