Agency Costs and Efficiency of Business Capital Investment: Evidence from Quarterly Capital Expenditures

Posted: 25 Jun 2001 Last revised: 19 Nov 2016

See all articles by Hyun-Han Shin

Hyun-Han Shin

Yonsei University

Yong H. Kim

University of Cincinnati

Multiple version iconThere are 2 versions of this paper

Abstract

Using the quarterly Compustat files, we present empirical findings that business capital investment is significantly higher in the fourth quarter than in other quarters. Even after controlling for business capital investment determinants, we find that the fourth quarter capital investment is significantly larger but less sensitive to investment opportunities than other quarters' capital investment. This phenomenon is more evident for firms with larger cash holdings than for firms with smaller cash holdings, for larger firms than for smaller firms, and for diversified firms than for stand-alone firms. Our findings suggest a high level of agency costs in corporate investment decisions.

Keywords: Agency cost, Capital investment efficiency, Quarterly capital expenditure

JEL Classification: G31, G32

Suggested Citation

Shin, Hyun-Han and Kim, Yong H., Agency Costs and Efficiency of Business Capital Investment: Evidence from Quarterly Capital Expenditures. Journal of Corporate Finance, Vol.8, pp. 139-158, 2002, Available at SSRN: https://ssrn.com/abstract=274559

Hyun-Han Shin

Yonsei University ( email )

50 Yonsei Ro
Seodaemoon Gu
Seoul
Korea, Republic of (South Korea)
82-2-21235466 (Phone)

HOME PAGE: http://https://ysb.yonsei.ac.kr/faculty.asp?mid=n02&sOpt=&uid=32

Yong H. Kim (Contact Author)

University of Cincinnati ( email )

Lindner College of Business
410 Carl H. Lindner Hall, P.O. Box 210195
Cincinnati, OH 45221
United States
513-556-7084 (Phone)
513-556-0979 (Fax)

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