R&D investment–cash flow sensitivity under managerial optimism

Ezzeddine Ben Mohamed and Mohammed Abdelshakour Shehata

Journal of Behavioral and Experimental Finance, 2017, vol. 14, issue C, 1-4

Abstract: The aim of this paper is to explore the effect of managerial optimism on the R&D cash-flow (hereafter, R&D ICF) sensitivity. Departing from 864 yearly observations between 108 public firms listed at the NYSE from 1999 to 2010, we construct a measure of managerial optimism as it described by Malmendier and Tate (2005) and we use a standard Q-model of investment. Our results report that firms with optimistic CEOs apply a strong positive and significant R&D ICF sensitivity. Running estimation for sub-sample firms, we find that the sensitivity of R&D investment to cash flows is stronger for more constrained group than the less constrained group.

Keywords: Managerial optimism; R&D expenditure; ICF sensitivity; Financial constraints (search for similar items in EconPapers)
JEL-codes: G02 G30 G31 G32 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:14:y:2017:i:c:p:1-4

DOI: 10.1016/j.jbef.2017.02.001

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