Corporate governance, accounting information environment and investment-cash flow sensitivity

Ming Li and Liang Song

International Journal of Accounting & Information Management, 2018, vol. 26, issue 4, 492-507

Abstract: Purpose - The purpose of this paper is to test the effects of antitakeover protection on investment-cash flow sensitivity and whether these effects are moderated by firms’ accounting information environment and agency problems. Design/methodology/approach - To test the effects of agency problems, the authors use the passage of second-generation antitakeover laws as the testing ground, which is a pseudo-natural experiment that is widely used in the accounting, finance and economics literature (e.g.Armstronget al., 2012;Bertrand and Mullainathan, 2003). Findings - The authors’ analysis shows that investment-cash flow sensitivity is greater when managers are insulated from takeovers. The authors’ results also demonstrate that the effects of the passage of antitakeover laws on investment-cash flow sensitivity are greater when firms’ accounting information environment is poor, which is measured by fewer analysts following and higher analyst forecast dispersion. The authors also show that the effects of the passage of antitakeover laws on investment-cash flow sensitivity are greater when firms have severe agency problems, which are measured by more free cash flow. Originality/value - The authors’ research extends the empirical accounting literature about the effects of corporate governance and accounting information environment on firms’ operating and financial decisions.

Keywords: Corporate governance; Investment; cash flow; Accounting information environment; M41; M48 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

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:eme:ijaimp:ijaim-04-2017-0049

DOI: 10.1108/IJAIM-04-2017-0049

Access Statistics for this article

International Journal of Accounting & Information Management is currently edited by Dr Xin (Robert) Luo and Professor Han Donker

More articles in International Journal of Accounting & Information Management from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().