IDEAS home Printed from https://ideas.repec.org/a/eee/jbrese/v69y2016i6p2151-2159.html
   My bibliography  Save this article

Non-financial performance in product market and capital expenditure

Author

Listed:
  • Liao, Li-Kai
  • Lin, Yi-Mien
  • Lin, Tsung-Wen

Abstract

This paper analyzes the antecedent conditions of capital expenditure to fill a gap in the literature. This paper argues that non-financial performance measures related to product status and product market may influence corporate capital investment decisions. Industrial product market competition also compels companies to adopt incentives for capital expenditures. This paper further describes the impact of agency costs for firms on the relationship between non-financial performance and capital expenditure, because corporate investment decision involves management discretion. In a Taiwanese sample consisting of 5815 firm-years during 2005–2012, the findings demonstrate a negative relationship between two current non-financial performance measures as follows: 1. defect-free rate and 2. market share rate and future capital expenditures. When industry faces competition pressure, a firm will not increase future capital expenditures. The agency costs may inversely affect the relationship between non-financial performance measures and future capital expenditures.

Suggested Citation

  • Liao, Li-Kai & Lin, Yi-Mien & Lin, Tsung-Wen, 2016. "Non-financial performance in product market and capital expenditure," Journal of Business Research, Elsevier, vol. 69(6), pages 2151-2159.
    • Handle: RePEc:eee:jbrese:v:69:y:2016:i:6:p:2151-2159
    DOI: 10.1016/j.jbusres.2015.12.023
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0148296315006487
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusres.2015.12.023?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Larcker, David F., 1983. "The association between performance plan adoption and corporate capital investment," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 3-30, April.
    2. Rachel Griffith, 2001. "Product market competition, efficiency and agency costs: an empirical analysis," IFS Working Papers W01/12, Institute for Fiscal Studies.
    3. Titman, Sheridan & Wei, K. C. John & Xie, Feixue, 2004. "Capital Investments and Stock Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(4), pages 677-700, December.
    4. McConnell, John J. & Muscarella, Chris J., 1985. "Corporate capital expenditure decisions and the market value of the firm," Journal of Financial Economics, Elsevier, vol. 14(3), pages 399-422, September.
    5. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    6. Gerard Hoberg & Gordon Phillips & Nagpurnanand Prabhala, 2014. "Product Market Threats, Payouts, and Financial Flexibility," Journal of Finance, American Finance Association, vol. 69(1), pages 293-324, February.
    7. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    8. Michael J. Cooper & Huseyin Gulen & Michael J. Schill, 2008. "Asset Growth and the Cross‐Section of Stock Returns," Journal of Finance, American Finance Association, vol. 63(4), pages 1609-1651, August.
    9. Riley, Richard Jr. & Pearson, Timothy A. & Trompeter, Greg, 2003. "The value relevance of non-financial performance variables and accounting information: the case of the airline industry," Journal of Accounting and Public Policy, Elsevier, vol. 22(3), pages 231-254.
    10. Jen Baggs & Jean‐Etienne De Bettignies, 2007. "Product Market Competition And Agency Costs," Journal of Industrial Economics, Wiley Blackwell, vol. 55(2), pages 289-323, June.
    11. Haye, Eric M., 1997. "Corporate control effects and managerial remuneration in commercial banking," Journal of Economics and Business, Elsevier, vol. 49(3), pages 239-252.
    12. Chung, Kee H. & Wright, Peter & Charoenwong, Charlie, 1998. "Investment opportunities and market reaction to capital expenditure decisions," Journal of Banking & Finance, Elsevier, vol. 22(1), pages 41-60, January.
    13. Chan, Su Han & Gau, George W. & Wang, Ko, 1995. "Stock Market Reaction to Capital Investment Decisions: Evidence from Business Relocations," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(1), pages 81-100, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Christiono Utomo & Sulfiah Dwi Astarini & Dewa Made Satriya Wibawa Mertha & Yani Rahmawati & Aqsha & Cahyono Bintang Nurcahyo & Maulita Nahdiyah, 2022. "Decision Factors of Stakeholder Integration in Connected Construction for Circular Economics," Sustainability, MDPI, vol. 14(23), pages 1-18, December.
    2. Magaly Gaviria-Marin & Jorge Matute-Vallejo & Hugo Baier-Fuentes, 2021. "The effect of ICT and higher-order capabilities on the performance of Ibero-American SMEs," Computational and Mathematical Organization Theory, Springer, vol. 27(4), pages 414-450, December.
    3. Joura, Essam & Xiao, Qin & Ullah, Subhan, 2021. "The impact of Say-on-Pay votes on firms' strategic policies: Insights from the Anglo-Saxon economy," International Review of Financial Analysis, Elsevier, vol. 73(C).
    4. Lin, Yan & Liu, Yijia & Chan, Kam C., 2021. "Political connections and product market competition: Effects and channels," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 801-816.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jian, Ming & Lee, Kin Wai, 2011. "Does CEO reputation matter for capital investments?," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 929-946, September.
    2. Sungsoo Kim & Amitav Saha & Sudipta Bose, 2021. "Do capital expenditures influence earnings performance: Evidence from loss‐making firms," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2539-2575, April.
    3. Ujjayini Roy & Indrani Chakraborty, 2023. "Market concentration, agency cost and firm performance: a case study on Indian corporate firms," Economic Change and Restructuring, Springer, vol. 56(4), pages 2645-2693, August.
    4. Kenneth W. Clements & Liang Li, 2014. "Valuing Resource Investments," Economics Discussion / Working Papers 14-27, The University of Western Australia, Department of Economics.
    5. repec:bla:finmgt:v:36:y:2007:i:2:p:1-21 is not listed on IDEAS
    6. Esther B. Del Brio & Javier Perote & Julio Pindado, 2003. "Measuring the Impact of Corporate Investment Announcements on Share Prices: The Spanish Experience," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(5‐6), pages 715-747, June.
    7. Liang Li, 2012. "How Much Are Resource Projects Worth? A Capital Market Perspective," Economics Discussion / Working Papers 12-13, The University of Western Australia, Department of Economics.
    8. Jung Fang Liu & Nicholas Rueilin Lee & Yih-Bey Lin & Zang-Po Hong, 2015. "The Capital Investment Increases and Stock Returns," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(1), pages 1-11, January.
    9. Kenneth Clements & Liang Li, 2017. "Understanding resource investments," Applied Economics, Taylor & Francis Journals, vol. 49(20), pages 1950-1962, April.
    10. Ruoran Xu & Joseph T. L. Ooi, 2018. "Good Growth, Bad Growth: How Effective are REITs’ Corporate Watchdogs?," The Journal of Real Estate Finance and Economics, Springer, vol. 57(1), pages 64-86, July.
    11. Sabet, Amir H. & Heaney, Richard, 2016. "An event study analysis of oil and gas firm acreage and reserve acquisitions," Energy Economics, Elsevier, vol. 57(C), pages 215-227.
    12. repec:bla:finmgt:v:36:y:2007:i:2:p:1-21:2 is not listed on IDEAS
    13. Nwaeze, Emeka T., 2005. "Replacement versus adaptation investments and equity value," Journal of Corporate Finance, Elsevier, vol. 11(3), pages 523-549, June.
    14. Roristua Pandiangan & Etty Murwaningsari, 2020. "Effect of Investment Decision and Tax Management on Stock Liquidity," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 9(3), pages 64-77, July.
    15. Agiakloglou, Christos & Gkouvakis, Michail, 2015. "Causal interrelations among market fundamentals: Evidence from the European Telecommunications sector," The Quarterly Review of Economics and Finance, Elsevier, vol. 55(C), pages 150-159.
    16. Ferrell, Allen & Liang, Hao & Renneboog, Luc, 2016. "Socially responsible firms," Journal of Financial Economics, Elsevier, vol. 122(3), pages 585-606.
    17. Matthias Kiefer & Edward Jones & Andrew Adams, 2016. "Principals, Agents and Incomplete Contracts: Are Surrender of Control and Renegotiation the Solution?," CFI Discussion Papers 1603, Centre for Finance and Investment, Heriot Watt University.
    18. Liu, Siqi & Yin, Chao & Zeng, Yeqin, 2021. "Abnormal investment and firm performance," International Review of Financial Analysis, Elsevier, vol. 78(C).
    19. Hussein Abdoh & Yu Liu, 2021. "Executive risk incentives, product market competition, and R&D," The Financial Review, Eastern Finance Association, vol. 56(1), pages 133-156, February.
    20. Lu Zhang, 2017. "The Investment CAPM," European Financial Management, European Financial Management Association, vol. 23(4), pages 545-603, September.
    21. Sualihu, Mohammed Aminu & Rankin, Michaela & Haman, Janto, 2021. "The role of equity compensation in reducing inefficient investment in labor," Journal of Corporate Finance, Elsevier, vol. 66(C).
    22. Bushman, Robert M. & Smith, Abbie J., 2001. "Financial accounting information and corporate governance," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 237-333, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbrese:v:69:y:2016:i:6:p:2151-2159. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusres .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.