Agency problems and capital expenditure announcements

Timothy J. Brailsford*, Daniel Yeoh

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

41 Citations (Scopus)


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
Issue number2
Publication statusPublished - Apr 2004
Externally publishedYes


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