Investigating the Interactive Effect of Financial Constraints and Development on the Relationship between Stock Liquidity and the Company's Future Investment

Document Type : Research Paper

Authors

1 1. Assistant Professor, Department of Accounting, Faculty of Management, Economics and Accounting, Payam Noor University, Tehran, Iran.

2 2. Instructor of Accounting Department, Faculty of Management, Economics and Accounting, Payam Noor University, Tehran, Iran.

3 3. Accounting PhD student, Department of Accounting, Faculty of Economics and Management, Urmia University, Urmia, Iran.

Abstract

 The purpose of this research is to investigate the interactive effect of financial development and restrictions on the relationship between stock liquidity and future investment of the company.

 The method used to test the research hypotheses is to use the combined data regression model to analyze the data of 111 companies admitted to the Tehran Stock Exchange during the period from 2014 to 2018.

 The findings of the research show that the multidimensional liquidity criterion of Amihud has a positive and significant effect on the future investment of the company. In addition, the interactive variable of financial limitation leads to the intensification of the relationship between the multidimensional liquidity of Amihud and the future investor of the company. Also, the interactive variable of financial development leads to the strengthening of the relationship between the multidimensional liquidity of Amihud and the future investment of the company.

: The higher liquidity of the shares leads to an increase in the company's future investment level, and in this way, the cash flow, increase and cost of capital related to future investments are reduced. Also, the value of the coefficients and the direction of the criteria related to the measurement of the interactive variable of financial constraints indicate the positive and significant moderating role of this variable on the relationship between the liquidity of shares and the company's future investment. The criterion related to measuring the financial development index also has an interactive role on the relationship between liquidity and future investment,.

 Management and policy makers can facilitate the flow of liquidity and reduce the capital cost of companies by knowing the factors affecting the liquidity of stocks and the opportunities for improvement and growth of the company's future investment.

Keywords

Main Subjects

References

 
         Abdi, E., Khodadad Kashi, F., Mosavi Jahromi, Y. (2018). The Effect of Financial Development on the Investment of the Companies Listed on the Tehran Stock Exchange, Economic Modeling Research Quartery, 33(9): 7-42. (In Persian).
         Alhassan, A., Naka, A. (2020). Corporate future investments and stock liquidity: Evidence from emerging markets, international review of economics & finance, 65(C): 69-83. DOI: 10.1016/j.iref.2019.10.002
Altay. E., Çalgıcı, S. (2019). Liquidity adjusted capital asset pricing model in an emerging market: Liquidity risk in Borsa Istanbul, Borsa Istanbul Review, 19(4): 297-309.
Amihud, Y., Mendelson, H. (1988). Liquidity and asset prices: financial management implications, Financial Management, 17: 5–15.
Asgarzadeh, G. (2016). The relationship between liquidity and investment opportunities in the shares of companies listed on the Tehran Stock Exchange, Fourth National Conference on Management, Economics and Accounting, Tabriz, East Azerbaijan Industrial Management Organization,https://www.civilica.com/Paper-NDMCONFT04-NDMCONFT04_242.html.(In Persian).
Baharvand, A., Dastgir, M & Soroushyar, A. (2021). The Impact of Financial Constraints on the Relationship between Excess Cash with Trading Continuity and Stock Liquidity, Accounting and Auditing Review, 28(1): 31-53. (In Persian).
Beheshti, M., Memarnejad, A., Torabi, T & Hosseini, S. (2022). Analysis of the effect of financial development and trade liberalization on economic growth in emerging economies and low-income countries (with a new perspective on the financial development index), Financial Knowledge and Securities Analysis, 15(1): 79-96. (In Persian).
Biddlea, C., Hilary, G., Verdic, S. (2009). How does financial reporting quality relate to investment efficiency? Journal of Accounting and Economics, 48: 112- 131.
Bozorg Asl, M., Marfoue, M., Arabi, M. (2017). the relationship between limits-to-arbitrage and asset grow anomaly in companies, Financial Accounting and Audit Research, 10(39):65-80. (In Persian).
 Buehlmaier, M., & Whited, T. (2017). Are Financial Constraints Priced? Evidence from Textual Analysis, The Review of Financial Studies, 31(7): 2693–2728.
Chitsazan, H., Mirlohi, S., & Nezhadolhoseini, N. (2021). The effect of financial development on the financing of companies listed on the Tehran Stock Exchange with Club convergence approach, Journal of Investment Knowledge, 40: 331-352. (In Persian).
Creane. S., Goyal, R., Mobarak, A & Sab, R. (2004). Evaluating Financial Sector Development in the Middle East and North Africa: New Methodology and Some New Results, Topics in Middle Eastern and North African Economies, 6: 79-101.
Dastgir, M., Sakiyrani, A., Salehi, N. (2019), Effects of Financial Constraints on Crash Risk of Future Stock Price in View of the Effects of Abnormal Accruals, Journal of Accounting Knowledge, 10(1): 67-90.
Demirguc Kunt. A & Maksimovic, V. (1995). Stock Market Development and Firm Financing Choices, The World Bank Economic Review,10(2): 341-369.
Di, J. and Wang, L.L. (2018) Application of Improved Deep Auto-Encoder Network in Rolling Bearing Fault Diagnosis. Journal of Computer and Communications, 6(7): 41-53.
Doku, J., Adjasi, C & Sarpong, E. (2011). Financial market development and capital structure of listed firms: Empirical evidence from Ghana, Serbian Journal of Management, 6(2):155-168.
Ebrahimi Sarv Olya, M., Salimi, M.j & Ghouchi Fard, H. (2020).  The effect of myopic investors' avoidance losses on the Tehran Stock Exchange, Journal of Experimental Studies in Financial Accounting, 17(17): 89-124. (In Persian).
Ebrahimi, S. K, Bahrami Nasab, Ali & Mehrabi Hashtchin, N. (2022). Investigating the effect of political communication on the relationship between financial constraints and abnormal returns, Financial Management Strategy, 10(36): 113-132. (In Persian).
Ferdinand, A., gul-Burch, T & Kealey. (1999). Chaebol, Inivestment opportunity set and corporate Debt and dividend policies ofkoreancompanie, review of Quantitativefinance and Accounting, (13) 4: 401-416.
Ghajarbeigi, M & Nafat, Farzan. (2021). Investigate the relationship between liquidity, earnings management and expected stock returns, new research approaches in management and accounting,5(71): 194-211. (In Persian).
Ghaderi, K & Ghaderi, S. (2017). Impact of Stock Liquidity on Earnings Management Based on Discretionary Accruals and the Actual Items, Journal of Accounting and Social Interests,7(3) :21-40. (In Persian).
Haghighat, H & Zargar Fiugi, y. (2013). The effect of financial and cash constraints on investment sensitivity to cash flow, Applied research in financial reporting,2(3): 149-174. (In Persian).
Heidari Haratemeh, M & Shirinbakhsh, S. (2017). The Impact of the Dividend Policy and Ownership Structure on the Financing Constraints, Journal of Accounting and Social Interests, 7 (4): 89-104. (In Persian).
Hovakimian, G. (2011). Financial constraints and investment efficiency: Internal capital allocation across the business cycle, Journal of Financial Intermediation, 20(2): 264-283.
Kalhor, S., Reiszadeh, M. & Alipour. (1400). The effect of stock liquidity on future investment considering the moderating role of economic sanctions, New Achievements in Humanities Studies, 4 (39): 105-119. (In Persian).
Kazemi, H & Heidari, A. (2012). The relationship between stock liquidity and investment opportunities, Quarterly Journal of Financial Knowledge of Securities Analysis,5(4): 21-31. (In Persian).
Khajavi, S & Salehi nia, M. (2015). Financing Limitations and Company Growth (Case Study: Tehran Stock Exchange), Financial Accounting Quarterly,7(25): 29-48. (In Persian).
Lari Dasht Bayaz, M., Salehi, M & Sekhavatpour, M. (2018). The Relationship between Financial Constraints, the Structure of Assets and Financing in Companies Listed in Tehran Stock Exchange, Quarterly Journal of Asset Management and Financing, 6(1): 181-196. (In Persian).
Mehrani, K., Tahriri, A & Farhadi, S. (2016). Business cycle life cycle, capital structure and value of companies listed on the stock exchange. Journal of Accounting knowledge, 5(17) :163-180. (In Persian).
Mosabebi, S & Darabi, R. (2018). The Relationship between Corporate Investment and Stock Liquidity with Emphasis on Critique of Financial Constraints in the Iranian Capital Market, Journal of Economics and Business,9(19): 63-78. (In Persian).
Moradi, M., Oskou, V & Dalir, K. (2021). A survey the impact of Managerial overconfidence the Relationship between internal financing and investment efficiency, Shabak specialized scientific journal,7(5): 21-32. (In Persian).
Modanlou, F., Naderian, A., Khozin, A & Goganli Dooji, J. (2022). Investigating the relationship between free cash flow, investment sensitivity and the moderating role of financial constraints, Financial Economics, 57: 309-331. (In Persian).
Mohammadzadeh salteh, H. (2015). The impact of investment opportunities, company growth and capital productivity The performance of the company in the capital market of Iran, Productivity management, 9(36): 141-162. (In Persian)
Nadafi, Z & Pourali, M.R. (2020). The Effect of Stock Liquidity on Company´s Future Investment: A Study of the Iranian Capital Market, Innovation management and operational strategies, 1(3): 269-283. (In Persian).
Norouzi, M & Aflatouni, A. (2019). Investigating the existence of the optimal level of working capital management and the effect of financial constraints on the existing optimal level, Empirical accounting research,8(31): 1-22. (In Persian).
Rahimian, N & Janfada, R. (2014). Corporate governance system and financial constraints (investment sensitivity to cash flow), Investment Knowledge Research, 3(10): 25-45. (In Persian).
Rezae, N & Shahdad, M. (2016). The effect of corporate financing constraint index on liquidity, First International Conference on Management, Accounting, Educational Sciences and Resistance Economics; Action and practice, Baran Andisheh Scientific Research Company. https://www.civilica.com/Paper-MAESREAI01-MAESREAI01_135.html
Rubin, B. (2007). The design versus the analysis of observational studies for causal effects: parallels with the design of randomized trials, Statistics in Medicine, 26(1): 20-36.
Saedi, A & Dadar, O. (2009). Investigating the relationship between stock liquidity, especially the liquidity of previous periods in the Tehran Stock Exchange, Journal of Management Studies, 16: 75-98.
Saleh, I., Abu Afifa, M. (2020). The effect of credit risk, liquidity risk and bank capital on bank profitability: Evidence from an emerging market, Cogent Economics & Finance, 8(1): 1-13.
 Salmanian, M., Vakili Fard, H., Hamidian, M., Saraf, F& Darabi, R. (2017). Presenting a forecasting model of financial constraints (case study: government companies admitted to the Tehran Stock Exchange), Government Accounting, 4(2): 93-104. (In Persian).
Searat, A., Benjamin, L & Jen, S. (2017). Corporate governance and stock liquidity dimensions: Panel evidence from pure orderdriven Australian market, International Review of Economics and Finance. 50(C): 275-304.
Shorouzi, M.R, Boroumand, R., Sadeghi Panah, J. (2010). Relationship between investment opportunities and deviden policy, Quantitative studies in Abhar management, 1(2): 110-130. (In Persian).
Talebi, B., Pakmaram, A., Mojarad alaea, M. (2018). The relationship between financial constraints and investment: with emphasis on the cash flow pattern life cycle, perspective of accounting and management, 2(15): 67-81.
Winifred, H & Khelifa M. (2018).  Excess cash, tradingcontinuity, and liquidity risk, Journal of Corporate Finance, 48(C): 275-291.
Financial Management Strategy
Volume 11, Issue 4 - Serial Number 43
December 2023
Pages 93-118

Files

History

  • Receive Date: 04 September 2022
  • Revise Date: 01 May 2023
  • Accept Date: 19 June 2023

Share

How to cite

Statistics