Investment spending and corporate governance: Evidence from the ASE listed firms
Abstract
Purpose
The purpose of this paper is to present evidence on the effects that different ownership's structures of Greek listed firms exercise on the relation between investment and liquidity constraints.
Design/methodology/approach
Corporate governance in Greece is primarily based on the form of family‐owned firms, as in many European countries. In countries with similar corporate governance systems, a possible source of separation (in the absence of bank‐controlled firms and large business groups) between management and ownership is the nationality of the companies, as foreign nationality implies the physical separation of managers and owners. A second possible separation is based on the shareholdings of the CEO when he/she bears no relation with the controlling shareholders. A sample of Athens Stock Exchange listed firms is collected and a generalized (vs a simple) model of investment is applied to test the role of corporate governance using these two basic separations of management and ownership.
Findings
The paper's empirical findings support the hypothesis of asymmetric information both in the total sample and in various sub‐samples. Low Q, small, and new firms under the generalized model are facing asymmetric information problems. On the other hand, low Q, old and low dividend firms are more likely to face managerial discretion problems that result in over‐investment.
Originality/value
This paper links information‐related problems of investment with simple corporate governance structures.
Keywords
Citation
Dedoussis, E. and Papadaki, A. (2010), "Investment spending and corporate governance: Evidence from the ASE listed firms", Managerial Finance, Vol. 36 No. 3, pp. 201-224. https://doi.org/10.1108/03074351011019546
Publisher
:Emerald Group Publishing Limited
Copyright © 2010, Emerald Group Publishing Limited