INVESTMENT DECISION AND FINANCIAL CONSTRAINTS: EMPIRICAL STUDY ON INDONESIAN STOCK EXCHANGE
Keywords:
Investment decision, liquidity, financially constraint
Abstract
This research aims to test the sensitivity level of liquidity and invesment opportunity to invesment decision between non-financially constrained and financially constrained firms. Sample in this research is the firm of non finance which enlist in Indonesia Stock Exchange from period 2003 to 2007, obtained sample 136 firms with 680 observations. Result of research refer that liquidity and invesment opportunity have an influence on positive to invesment decision. Liquidity is more sensitive to invesment decision for financially constrained firms. Invesment opportunity is more sensitive to invesment decision for non financially constrained
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References
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Fama, Eugene F. and French, Kenneth R. (2000), “Testing Tradeoff and Pecking Order Predictions about Dividents and Debt”, The Center for Research in Security Price Working Paper No. 506.
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Kaplan, Steven N. and Zingales, Luigi (2000), “Investment-Cash Flow Sensitivities Are Not Valid Measures of Financing Constraints”, Quarterly Journal of Economics, May: pp. 707-712.
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Kristianti, Rina A. (2002), “Pengaruh Likuiditas Terhadap Keputusan Investasi Aktiva Tetap pada Perusahaan Yang Dikelompokkan dalam Financially Constraints”, Tesis Program Pasca Sarjana (Magister Sains), Fakultas Ekonomi dan Bisnis Universitas Gadjah Mada, Tidak dipublikasikan.
Lang, Larry, Ofek, Eli, and Stulz, Rene M. (1996), “Leverage, Investment, and Firm Growth”, Journal of Financial Economics, 40, pp. 3-29.
Modigliani, Franco and Miller, Merton, H. (1958), “The Cost of Capital, Corporation Finance, and the Theory of Investment”, American Economics Review, 48: pp. 461-297.
Moyen, Nathalie (2004), “Investment-Cash Flow Sensitivities: Constrained versus Unconstrained Firms”, Journal of Finance, vol. LIX, no. 5: pp. 2061-2092.
Myers, Stewart C. (1984), “The Capital Structure Puzzle”, Journal of Finance, 39: pp. 575-592.
Myers, Stewart C. and Majluf, Nicholas S. (1984), “Corporate Financing and Investment Decisions when Firms Have Information that Investors Do Non Have”, Journal of Financial Economics, 13: pp. 187-221.
Myers, Stewart C. (1977), “Determinant of Corporate Borrowing”, Journal of Financial Economics,November: 147-176.
Prasetyantoko, Augustinus, (2007), “Financing Constraints and Firm-Level Investment Following a Financial Crisis in Indonesia”, Working Papers on Documents De Travail, Juli: pp. 1-42.
Riyanto, Bambang, (1997), “Dasar-dasar Pembelanjaan Perusahaan”, edisi 4, Yogyakarta: BPFE.
Schaller, Huntley, (1993), “Asymmetric Information, Liquidity Constraints, and Canadian Investment”, Canadian Journal of Economics, 26: pp. 552-574.
Smith, Jr. Clifford W. and Watts, Ross L. (1992), “The Investment Opportunity Set and Corporate Financing, Dividend, and Compensation Policies∆, Journal of Financial Economics, 32: pp. 263-292.
Vogt, S.G. (1994), “The Cash Flow/Investment Relationship: Evidence from U.S. Manufacturing Firm”, Financial Management, 23 (2): pp. 3-20.
Almeida, Heitor, Campello, Murillo, and Weisbach, Michael S. (2004), “The cash Flow Sensitivity of ash”, Journal of Finance, vol. LIX, no. 4: pp. 1777-1804.
Arifin, Zaenal, (2005), “Teori Keuangan dan Pasar Modal”, Yogyakarta: Ekonosia.
Brigham, Eugene F. and Ehrhardt, Michael C. (2005), “Financial Management: Theory and Practice” 11th edition, Thomson, South-Western.
Brigham, E.F., Gapenski, L.C., and Daves, P.R. (1999), “Intermediate Financial Management”, 6th Edition, The Dryden Press, Harcourt Brace College Publishers.
Chan, L. K. and Chen, N. (1991), “Structural and Return Characteristics of Small and Large Firms”, Journal of Finance, 46: pp. 1467-1484.
Chung, K.H. and Charoenwong, C. (1991), “Investment Options, Assets in Place, and the Risk of Stocks”, Financing Management, Autumn: pp. 21-33.
Cleary, Sean (2004), “International Corporate Investment and the Role of Financial Constraint”, Saint Mary’s University Working Paper.
Cleary, Sean (1999), “The Relationship between Firm Investment and Financial Status”, Journal of Finance, vol. LIV no. 2: pp. 673-692.
Fama, Eugene F. (1974), “The Empirical Relationship Between the Dividend and Investment Decisions of Firms”, American Economic Review, 76: pp. 323-329.
Fama, Eugene F. and French, Kenneth R. (2000), “Testing Tradeoff and Pecking Order Predictions about Dividents and Debt”, The Center for Research in Security Price Working Paper No. 506.
Fama, Eugene F. and French, Kenneth R. (1992), “The Cross-Section of Expected Stock Returns”, Journal of Finance, 47: pp. 427-465.
Fazzari, Steven M., Hubbart, Glenn R., and Petersen, Bruce C. (1988), “Financing Constrains and Corporate Investment”, Brooking Papers on Economic Activity, 19: pp. 141-195.
Gaver, J.J. and Gaver, K.M. (1993), “Additional Evidence on Association between the Investment Opportunity Set and Corporate Financing, Dividend, and Compensation Policies”, Journal of Accounting and Economics, 16: pp. 125-160.
Geczy, C., Minton, B.A., and Schrand, C. (1997), “Why Firm Use Currency Derivatives”, Journal of Finance, 52: pp. 1323-1354.
Ghozali, Imam, (2001), “Aplikasi Analisis Multivariate Dengan Program SPSS”, Semarang: BP Undip.
Gujarati, Damodar N. (2003), “Basic Econometric”, fourth edition, New York: McGraw-Hill.
Hanafi, Mamduh M. dan Halim, Abdul (2005), “Analisis Laporan Keuangan”, Edisi kedua, Yogyakarta: UPP AMP YKPN.
Hermeindito (2004), “Asimetri Informasi dan Kontrol Manajemen: Analisis Kepekaan Investasi dan Leverage Terhadap Pemilihan Sumber-sumber Pendanaan”, Disertasi Program Doktor, Fakultas Ekonomi dan Bisnis Universitas Gadjah Mada, Tidak dipublikasikan.
Hovakimian, Gayane and Titman, Sheridan, (2006), “Corporate Investment with Financial Constraints: Sensitivity of Investment to Funds from Voluntary Asset Sales”, Journal of Money, Credit, and Banking, 38 (2): pp. 357-374.
Hoshi, Takeo, Kashyap, Anil K., and Scharfstein, David, (1986), “Corporate Structure Liquidity and Investment: Evidence from Japanese Panel Data”, Quarterly Journal of Economics, 106: pp. 33-60.
Jensen, Michael C. (1986), “Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers”, American Economic Review, 76: pp. 323-329.
Jensen, Michael C. and Meckling, W.H. (1976), “Theory of the Firm: managerial Behavior, Agency Costs, and Ownership Structure”, Journal of Financial Economics, vol. 3 no. 4: pp. 305-360.
Kallapur, Sanjay and Trombley, Mark A. (1999), “The Association Between Investment Opportunity Set Proxies and Realized Growth”, Journal of Business and Accounting, April/May: pp. 505-519.
Kaplan, Steven N. and Zingales, Luigi (2000), “Investment-Cash Flow Sensitivities Are Not Valid Measures of Financing Constraints”, Quarterly Journal of Economics, May: pp. 707-712.
Kaplan, Steven N. and Zingales, Luigi (1997), “Do Financing Constraints Explain Why Investment is Correlated with Cash Flow?”, Quarterly Journal of Economics, 112: pp. 169-215.
Kristianti, Rina A. (2002), “Pengaruh Likuiditas Terhadap Keputusan Investasi Aktiva Tetap pada Perusahaan Yang Dikelompokkan dalam Financially Constraints”, Tesis Program Pasca Sarjana (Magister Sains), Fakultas Ekonomi dan Bisnis Universitas Gadjah Mada, Tidak dipublikasikan.
Lang, Larry, Ofek, Eli, and Stulz, Rene M. (1996), “Leverage, Investment, and Firm Growth”, Journal of Financial Economics, 40, pp. 3-29.
Modigliani, Franco and Miller, Merton, H. (1958), “The Cost of Capital, Corporation Finance, and the Theory of Investment”, American Economics Review, 48: pp. 461-297.
Moyen, Nathalie (2004), “Investment-Cash Flow Sensitivities: Constrained versus Unconstrained Firms”, Journal of Finance, vol. LIX, no. 5: pp. 2061-2092.
Myers, Stewart C. (1984), “The Capital Structure Puzzle”, Journal of Finance, 39: pp. 575-592.
Myers, Stewart C. and Majluf, Nicholas S. (1984), “Corporate Financing and Investment Decisions when Firms Have Information that Investors Do Non Have”, Journal of Financial Economics, 13: pp. 187-221.
Myers, Stewart C. (1977), “Determinant of Corporate Borrowing”, Journal of Financial Economics,November: 147-176.
Prasetyantoko, Augustinus, (2007), “Financing Constraints and Firm-Level Investment Following a Financial Crisis in Indonesia”, Working Papers on Documents De Travail, Juli: pp. 1-42.
Riyanto, Bambang, (1997), “Dasar-dasar Pembelanjaan Perusahaan”, edisi 4, Yogyakarta: BPFE.
Schaller, Huntley, (1993), “Asymmetric Information, Liquidity Constraints, and Canadian Investment”, Canadian Journal of Economics, 26: pp. 552-574.
Smith, Jr. Clifford W. and Watts, Ross L. (1992), “The Investment Opportunity Set and Corporate Financing, Dividend, and Compensation Policies∆, Journal of Financial Economics, 32: pp. 263-292.
Vogt, S.G. (1994), “The Cash Flow/Investment Relationship: Evidence from U.S. Manufacturing Firm”, Financial Management, 23 (2): pp. 3-20.
Published
2010-11-19
How to Cite
Hidayat, R. (2010). INVESTMENT DECISION AND FINANCIAL CONSTRAINTS: EMPIRICAL STUDY ON INDONESIAN STOCK EXCHANGE. Buletin Ekonomi Moneter Dan Perbankan, 12(4), 425-446. https://doi.org/10.21098/bemp.v12i4.379
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Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
