Agency problems and capital expenditure announcements

Date

2004

Authors

Brailsford, Timothy John
Yeoh, Daniel

Journal Title

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Volume Title

Publisher

University of Chicago Press

Abstract

This article examines the market valuation of announcements of new capital expenditure. Prior research suggests that the firm's growth opportunities and cash flow position condition the market response. This study jointly examines the role of growth and cash flow, and the interaction between them. Using a new data set of Australian firms that avoids problems associated with expectations models, the results are remarkably strong and support a positive association between growth opportunities and the market valuation, in addition to supporting the role of free cash flow. The findings have implications for the relationship between general investment information and stock prices.

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Citation

Source

Journal of Business (Chicago), The

Type

Journal article

Book Title

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Access Statement

License Rights

DOI

10.1086/381274

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