Effects of financial flexibility value and accounting conservatism on investment: evidence from mispricing

Chao Chin-Fang (), Yi-Mien Lin () and Teng-Shih Wang ()
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Chao Chin-Fang: Ling Tung University
Yi-Mien Lin: National Chung Hsing University
Teng-Shih Wang: Providence University

Journal of Economics and Finance, 2023, vol. 47, issue 3, No 8, 690-706

Abstract: Abstract This research examines how the interactive effects of financial flexibility value and accounting conservatism influence corporate investment decisions and further explores the moderating effect of a firm’s mispricing on the above relationship. The findings show that firms with high financial flexibility and conservatism in the prior period are less likely to over-invest in the current period, because managers tend to make conservative decisions. Moreover, equity financing results in over-investment among overpriced firms, which is robust after considering a firm’s hedging factor and high agency costs.

Keywords: Financial flexibility value; Accounting conservatism; Investment decision; Equity mispricing; Agency cost; G32; M20; M40 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s12197-023-09625-y

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