Managerial optimism, investment cash flow sensitivity and agency costs: Evidence from NYSE panel data firms

Ezzeddine Ben Mohamed

Journal of Behavioral and Experimental Finance, 2021, vol. 30, issue C

Abstract: This study deals with a new survey for the relationship between CEO optimism and investment cash flow (ICF) sensitivity in presence of asymmetric information and agency costs problems. In this paper, we conduct an empirical study of ICF among NYSE manufacture firms during the period 1999–2010. Our results report that the ICF sensitivity exists and is significant especially for firms that run agency costs. This result is robust to a battery of different model including alternative assumptions and different methodologies based on Adjusted Q-model and Euler equation model. For another set of tests, we demonstrate that a large blockholders holding may succeed to reduce investment cash flow caused by CEOs optimism bias.

Keywords: ICF sensitivity; Managerial optimism (search for similar items in EconPapers)
JEL-codes: G02 G30 G31 G32 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:30:y:2021:i:c:s2214635021000253

DOI: 10.1016/j.jbef.2021.100481

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