Agency problems and capital expenditure announcements

Timothy J. Brailsford, Daniel Yeoh

Research output: Contribution to journalArticleResearchpeer-review

28 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)223-256
Number of pages34
JournalJournal of World Business
Volume77
Issue number2
DOIs
Publication statusPublished - Apr 2004
Externally publishedYes

Fingerprint

Capital Expenditures
Valuation
Growth
Stock Prices
Interaction
Research
Market
Cash flow
Capital expenditures
Growth opportunities
Agency problems
Market valuation
Announcement
Business

Cite this

Brailsford, Timothy J. ; Yeoh, Daniel. / Agency problems and capital expenditure announcements. In: Journal of World Business. 2004 ; Vol. 77, No. 2. pp. 223-256.
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Agency problems and capital expenditure announcements. / Brailsford, Timothy J.; Yeoh, Daniel.

In: Journal of World Business, Vol. 77, No. 2, 04.2004, p. 223-256.

Research output: Contribution to journalArticleResearchpeer-review

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