The interaction of the financing and investment decisions: Preliminary results in the Australian context

Carl Chiarella; Toan M Pham; Ah Boon Sim; Madeleine M L Tan

doi:10.1007/BF01732897

Asia Pacific Journal of Management

October 1992, Volume 9, Issue 2, pp 209–229

The interaction of the financing and investment decisions: Preliminary results in the Australian context

Authors
Authors and affiliations

Carl Chiarella
Toan M Pham
Ah Boon Sim
Madeleine M L Tan

Articles

DOI: 10.1007/BF01732897

Cite this article as:: Chiarella, C., Pham, T.M., Sim, A.B. et al. Asia Pacific J Manage (1992) 9: 209. doi:10.1007/BF01732897

Abstract

This paper investigates the presence of the interaction of investment and financing decisions in Australian firms. Using simultaneous equations incorporating the variables of investment, dividend, and new debt issue, interactive effects are found for two sub-periods.

References

1.
Ali, M M and J Lew Silver, (1985), Tests for equality between sets of coefficients in two linear regressions under heteroscedasticity,Journal of the American Statistical Association, Theory and Methods, Vol 80, No 391.
2.
Chiarella, Carl, Toan M Pham, Ah Boon Sim and Madeleine M L Tan, (1991), The determinants of corporate capital structure: Australian evidence,School of Finance and Economics Working Papers Series, Working Paper No 3, University of Technology, Sydney. Forthcoming in S G Rhee and R P Chang, eds:Pacific-Basin Capital Markets Research, Vol III, North-Holland: Amsterdam, 1992.Google Scholar
3.
Chow, G C, (1960), Tests of equality between sets of coefficients in two linear regression,Econometrica 28, 591–605.Google Scholar
4.
Cooper, I and J Franks, (1983), The interaction of financing and investment decisions when the firm has unused tax credits,Journal of Finance 38, 571–583.Google Scholar
5.
Dhrymes, P J and M Kurz, (1967), Investment, dividends, and external finance behavior of firms, in R Ferber, ed:Determinants of Investment Behavior, Conference No 18 of the Universities — National Bureau Committee for Economic Research at the University of Wisconsin, Columbia University Press: New York.Google Scholar
6.
Fama, E F, (1974), The empirical relationships between the dividend and investment decisions of firms,American Economic Review 63, 304–318.Google Scholar
7.
Gordon, M J, (1978), The empirical relationship between the dividend and investment decisions of firms: A comment, Working Paper, University of Toronto.
8.
Gupta, S A, (1982), Structural shifts: A comparative study of alternative tests,Proceedings of the Business and Economic Statistics Section, American Statistical Association.
9.
Higgins, R C, (1972), The corporate dividend-saving decision,Journal of Financial and Quantitative Analysis 7, 1527–1541.Google Scholar
10.
Ho, K S, (1986), An empirical analysis of a causality relationship between corporate investment and financing decisions,Research in Finance 6, 179–196.Google Scholar
11.
Jörgenson, D W, (1971), Econometric studies of investment behaviour: A survey,Journal of Economic Literature 9, 1111–1147.Google Scholar
12.
Lintner, J, (1956), Distribution of incomes of corporations among dividends, retained earnings and taxes,American Economic Review, May, 97–113.
13.
Long, M S and I B Malitz, (1985), Investment patterns and financial leverage, in B M Friedman, ed:National Bureau of Economic Research: Corporate Capital Structures in the United States, The Chicago University Press.
14.
MacDonald J G, B Jacquillat and M Nussenbaum, (1975), Dividend, investment and financing decisions: Empirical evidence on French firms,Journal of Financial and Quantitative Analysis 10, 741–755.Google Scholar
15.
McCabe, G M, (1979), The empirical relationship between investment and financing: A new look,Journal of Financial and Quantitative Analysis 14, 119–135.Google Scholar
16.
Miller, M H, (1977), Debt and taxes,Journal of Finance 32, 261–276.Google Scholar
17.
Miller, M H and F Modigliani, (1966), Some estimates of the cost of capital to the electric utility industry, 1954–1957,American Economic Review, June, 333–391.
18.
Modigliani, F and M H Miller, (1958), The cost of capital, corporation finance, and the theory of investment,American Economic Review, June, 261–297.
19.
——, (1963), Corporate income taxes and the cost of capital: A correction,American Economic Review 53, 433–443.Google Scholar
20.
Morgan, I and J Saint-Pierre, (1978), Dividend and investment decisions of Canadian firms,Canadian Journal of Economics 11, 20–37.Google Scholar
21.
Mueller, D C, (1967), The firm decision process: An econometric investigation,Quarterly Journal of Economics 81, 58–87.Google Scholar
22.
Myers, S, (1984), The capital structure puzzle,Journal of Finance 39, 575–592.Google Scholar
23.
Myers, S, (1985), Investment patterns and financial leverage. Comment, in B M Friedman, ed:National Bureau of Economic Research: Corporate Capital Structure in the United States, The Chicago University Press, Chicago.Google Scholar
24.
Peterson, P P and G A Benesh, (1983), A re-examination of the empirical relationship between investment and financing decisions,Journal of Financial and Quantitative Analysis 18, 439–453.Google Scholar
25.
Schmidt, P and R Sickles, (1977), Some further evidence on the use of the Chow test under heteroscedasticity,Econometrica, Vol 45, 1293–1298.Google Scholar
26.
Smirlock, M and W Marshall, (1983), An examination of the empirical relationship between the dividend and investment decisions: A note,Journal of Finance 38, 1650–1667.Google Scholar
27.
Theil, H, (1971),Principles of Econometrics, New York: John Wiley.Google Scholar
28.
Toyoda, T, (1974), Use of the Chow test under heteroscedasticity,Econometrica, Vol 42, 601–608.Google Scholar
29.
Zellner, A, (1962), Efficient method of estimating seemingly unrelated regressions and tests for aggregate bias,Journal of the American Statistical Association 57, 348–368.Google Scholar

Copyright information

Authors and Affiliations

Carl Chiarella
Toan M Pham
Ah Boon Sim
Madeleine M L Tan

There are no affiliations available

Personalised recommendations

Actions

Unlimited access to the full article
Instant download
Include local sales tax if applicable

Subscribe to Journal

Get Access to

Asia Pacific Journal of Management

for the whole of 2017

The interaction of the financing and investment decisions: Preliminary results in the Australian context

Abstract

Copyright information

Authors and Affiliations

Personalised recommendations

Cookies