The influence of governance on investment: Evidence from a hazard model |
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Authors: | Matthew T. Billett Jon A. Garfinkel Yi Jiang |
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Affiliation: | aTippie College of Business, University of Iowa, United States;bMihaylo College of Business and Economics, California State University, Fullerton, United States |
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Abstract: | Does corporate governance affect the timing of large investment projects? Hazard model estimates suggest strong shareholder governance may deter managers from pursuing large investments. Controlling for investment opportunities, firms with good governance experience longer spells between large investments. However, in the presence of financial constraints or strong CEO incentives (high delta (δ)), we find no such timing differences. Finally, these higher investment hazard firms exhibit significantly negative long-run operating and stock performance. Overall, our findings are consistent with the notion that poor governance associates with overinvestment. |
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Keywords: | JEL classification: G32 G34 J33 |
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