Volume 1, Number 17 (7-2006)                   cs 2006, 1(17): 57-86 | Back to browse issues page

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Jahankhani A, Kanani Amiri M. Presentation of the Model to Determine the Capital Expenditures of Listed Companies in TSE Using Accounting Information. cs. 2006; 1 (17) :57-86
URL: http://cs.shahed.ac.ir/article-1-212-en.html

1. Associate Professor
Abstract:   (11534 Views)

  Financing strategy in corporations is one of the most important subject matters among accounting and finance scholars. Investment in companies to increase profitability is one of the important purposes of financing activities. Different methods for execution of financing activities include: Internal finance, external finance and combination of these two.

  The problem is that whether there is any relationship between investment and stock prices. Could any comparative prediction be made between the companies who choose internal finance to perform their investment activities and the companies who choose external finance?

  Is there any relationship between stock prices and investment in equity- dependent firms?

  The answer to all aforementioned questions is positive. Companies’ investment and the stock prices are interrelated by time series. There is also cross sectional relationship between companies’ investment and the stock prices.

  Scholars have defined and ranked equity dependent and levered firms by means of the famous index “KZ”.

  Compared with levered firms, equity dependent firms are more sensitive to non-fundamental constituents of the stock prices at the time of financing.

  Non-fundamental constituents of a stock price are specified by famous index called “Q” index. Equity dependent firms are also less sensitive to future returns of their stock at the time of financing.

  In this study, we have developed a simple model for situations under which the company’s investment is sensitive to Q alterations that carries/contain accounting and stock prices information.

  The key to cross-sectional prediction of this model is that the stock prices have stronger effect relative to investment of equity-dependent firms. We have supported our prediction model by using and localizing “Kaplan & Zingales” equity dependency index (KZ) and found out that sensitivity of investment to stock prices is much more in the companies lying under 5th quintile of KZ index in comparison with the companies lying above 5th quintile of the index. Several prediction models were also developed and examined in this study.

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Type of Study: Research | Subject: Special

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