The Effect of Mispricing On Investment of Indonesian Firms

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n\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart Pg1}{\bkmkend Pg1}\par\pard
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\expndtw-5\charscalex100 \ul0\nosupersub\cf1\f2\fs24 Middle Eastern Finance and
Economics \line \up0 \expndtw-5\charscalex100 ISSN: 1450-2889 Issue 9 (2011) \li
ne \up0 \expndtw-5\charscalex100 EuroJournals Publishing, Inc. 2011 \line \up0 \
expndtw-5\charscalex100 http://www.eurojournals.com/MEFE.htm \par\pard\ql \li128
8\sb0\sl-414\slmult0 \par\pard\ql\li1288\sb37\sl-414\slmult0 \up0 \expndtw0\char
scalex95 \ul0\nosupersub\cf3\f4\fs36 The Effect of Mispricing on Investment of I
ndonesian Firms: \par\pard\ql \li3362\sb1\sl-397\slmult0 \up0 \expndtw0\charscal
ex95 Do Financial Constraints Matter? \par\pard\ql \li5025\sb0\sl-276\slmult0 \p
ar\pard\ql\li5025\sb0\sl-276\slmult0 \par\pard\ql\li5025\sb11\sl-276\slmult0 \up
0 \expndtw-5\charscalex100 \ul0\nosupersub\cf4\f5\fs24 Irwan Trinugroho \par\par
d\ql \li3110\sb4\sl-276\slmult0 \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf
5\f6\fs24 Faculty of Economics, Sebelas Maret University, Indonesia \par\pard\ql
\li3220\sb1\sl-280\slmult0 \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf1\f2
\fs24 E-mail: irwan@fe.uns.ac.id or irwan_feuns@yahoo.co.id \par\pard\ql \li5265
\sb264\sl-276\slmult0 \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf4\f5\fs24
Risal Rinofah \par\pard\ql \li2534\sb4\sl-276\slmult0 \up0 \expndtw-5\charscalex
100 \ul0\nosupersub\cf5\f6\fs24 Master of Science in Management, Gadjah Mada Uni
versity, Indonesia \par\pard\ql \li4644\sb1\sl-280\slmult0 \up0 \expndtw-5\chars
calex100 \ul0\nosupersub\cf1\f2\fs24 E-mail: izal_7@yahoo.com \par\pard\ql \li55
22\sb0\sl-276\slmult0 \par\pard\ql\li5522\sb128\sl-276\slmult0 \up0 \expndtw-3\c
harscalex100 \ul0\nosupersub\cf4\f5\fs24 Abstract \par\pard\qj \li1524\sb0\sl-27
6\slmult0 \par\pard\qj\li1524\ri1695\sb8\sl-276\slmult0\fi720 \up0 \expndtw0\cha
rscalex105 \ul0\nosupersub\cf1\f2\fs24 The objective of this research is to exam

ine the effect of mispricing on firm\u8217?s \line \up0 \expndtw0\charscalex102
investment behavior and capital structure. We also test the role of the level of
financial \line \up0 \expndtw-3\charscalex100 constraints in the relationship b
etween mispricing and investment. Using pooled panel data \line \up0 \expndtw0\c
harscalex100 of Indonesian manufacturing firms from 2003-2007, we find that mis
pricing has positif \line \up0 \expndtw0\charscalex100 impact to firms investmen
t. However, this effect only slightly different whether on high \line \up0 \expn
dtw-1\charscalex100 financial constraint firms (financially constraint) or on lo
w financial constraint firms (less \line \up0 \expndtw0\charscalex100 constraint
). Moreover, this research also find that mispricing influence firms in choosing
\line \up0 \expndtw0\charscalex103 sources of funding which can be seen on thei
r debt to equity ratio\ul0\nosupersub\cf5\f6\fs24 \ul0\nosupersub\cf1\f2\fs24 (
D/E). To check the \line \up0 \expndtw0\charscalex103 accuracy of this examinati
on, we employ some robustness test and use several control \line \up0 \expndtw-1
\charscalex100 variables. These results are consistent with and can be explained
using market timing and \line \up0 \expndtw-2\charscalex100 catering hypotesis.
\par\pard\ql \li1533\sb0\sl-276\slmult0 \par\pard\ql\li1533\sb268\sl-276\slmult
0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf4\f5\fs24 Keywords: \ul0\nosup
ersub\cf1\f2\fs24 Mispricing, Investment, Capital Structure, Financial Constrai
nts \par\pard\ql \li993\sb286\sl-322\slmult0 \up0 \expndtw-4\charscalex100 \ul0\
nosupersub\cf6\f7\fs28 1. Introduction \par\pard\qj \li993\ri1105\sb0\sl-276\sl
mult0 \up0 \expndtw0\charscalex102 \ul0\nosupersub\cf1\f2\fs24 Capital market pl
ays important role for firms, Wang et al. (2008) explain that one of the importa
nt \up0 \expndtw-1\charscalex100 functions of capital market is as a medium to o
btain source of funding. When the market condition is \up0 \expndtw-3\charscalex
100 efficient, value of stock will fully reflect the fundamental of firm. But, i
n fact, stock price movement is \up0 \expndtw-4\charscalex100 not entirely a ref
lection of its fundamental value because the existence of non-fundamental factor
s such \up0 \expndtw-1\charscalex100 as market sentiment, behavioral biases of i
nvestors (Lakonishok et al., 1994), systematic errors when \up0 \expndtw-3\chars
calex100 assessing stock (Stein, 1996), asymmetric information (Tobin, 1969) cau
sing the value of stock deviate \up0 \expndtw-4\charscalex100 from its fundament
al value (misprice). \par\pard\qj \li993\ri1105\sb0\sl-280\slmult0\fi720 \up0 \e
xpndtw0\charscalex102 This condition influences firm\u8217?s investment decision
s. Managers can take advantage of the \line \up0 \expndtw0\charscalex103 overval
ued stock as a source of investment funding because the cost of capital becomes
cheaper. \line \up0 \expndtw0\charscalex100 Conversely, managers avoid selling s
tocks at undervalued because the cost of capital is higher. For \line \up0 \expn
dtw-1\charscalex100 high financial constraint firms, their source of funding is
concentrated on stock, this condition affect \line \up0 \expndtw-4\charscalex100
investment decision. \up0 \expndtw-2\charscalex100 Instead, for low financial c
onstraint firms, the value of stock does not affect their \par\pard\qj \li993\ri
1105\sb0\sl-280\slmult0 \up0 \expndtw-3\charscalex100 investment decisions becau
se of the availability of adequate funding sources. The sensitivity difference \
up0 \expndtw-4\charscalex100 is known as the equity financing channel (Stein, 19
96). \par\pard\qj \li993\ri1105\sb0\sl-280\slmult0\fi720 \up0 \expndtw-4\charsca
lex100 The examination of the relationship between investment, mispricing and fi
nancial constraints in \line \up0 \expndtw-4\charscalex100 various combinations
have been done especially in developed countries (eg, Polk and Sapienza, 2002;
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}}\par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart P
g2}{\bkmkend Pg2}\par\pard\li1295\sb272\sl-276\slmult0\fi0\tx10991 \up0 \expndtw
-3\charscalex100 \ul0\nosupersub\cf5\f6\fs24 Middle Eastern Finance and Economic
s - Issue 9 (2011)\tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24
15\par\pard\qj \li1295\ri803\sb204\sl-276\slmult0 \up0 \expndtw-1\charscalex100
Baker et al., 2003; Chang et al., 2007). Polk and Sapienza (2004) find that ove
rvalued (undervalued) \up0 \expndtw0\charscalex103 firms tend to overinvest (un
derinvest). Overvalued firms tend to accept project with negative net \up0 \expn
dtw-3\charscalex100 present value (NPV), consequences of excess sources of fundi
ng. While, the undervalued firms tend to \up0 \expndtw-3\charscalex100 reject pr
oject that has positive NPV because of the limitation of funding. Baker et al. (
2003) conducted \up0 \expndtw0\charscalex102 research in the US using 52,101 ob
servations, they find that stock price movements in the capital \up0 \expndtw-2\
charscalex100 market are able to influence investment more strongly to firms wit
h high financial constraint than low \up0 \expndtw-3\charscalex100 financial con
straint firms. \par\pard\qj \li1295\ri803\sb6\sl-274\slmult0\fi720 \up0 \expndtw
-1\charscalex100 Wang et al. (2008) explain that differences in social system, t
he structure of microeconomics, \up0 \expndtw0\charscalex100 economic developmen
t stage and the structure of financial markets in different countries lead
to \up0 \expndtw-4\charscalex100 differences in the relationship between st
ock market and investment. This is evidenced by their \up0 \expndtw-2\ch
arscalex100 research in China found that the policy of investment was not signif
icantly response the movement in \up0 \expndtw-2\charscalex100 capital market.
Therefore, we try to examine the relationship between stock market an
d firms \up0 \expndtw0\charscalex100 investment in Indonesia, a developing coun
tries with rapid growth in capital market. We expect that \up0 \expndtw-2\charsc
alex100 our results give a broader understanding of the relationship between sto
ck market, investment, capital \up0 \expndtw-2\charscalex100 structure and the r
ole of financial constraint in the context of Indonesian firms. \par\pard\ql \li
1295\sb0\sl-322\slmult0 \par\pard\ql\li1295\sb245\sl-322\slmult0 \up0 \expndtw-4
\charscalex100 \ul0\nosupersub\cf6\f7\fs28 2. Previous Research \par\pard\ql \l
i1295\sb1\sl-271\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs
24 2.1. Mispricing and Investment \par\pard\qj \li1295\ri802\sb125\sl-276\slmult
0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 Mispricing is define
d as a condition in which the value of stock in the capital market different fro
m its \line \up0 \expndtw-4\charscalex100 fundamental value. Some causes of the
mispricing are the presence of asymmetric information between \line \up0 \expndt
w-3\charscalex100 manager and investor, as well as the bias of investor assessme
nt (Alzahrani, 2006). Bias in assessment \line \up0 \expndtw0\charscalex100 is a
n element of investors irrationality when making an assessment of a stock. Sadka
and Scherbina \line \up0 \expndtw0\charscalex102 (2007) find that the mispricin
g also arise due to disagreements among the analysts associated with \line \up0
\expndtw-3\charscalex100 transaction costs or the liquidity of the stock.
The relationship between stock prices and firm\u8217?s \line \up0 \expndt
w0\charscalex105 investment have a lot of attention since the recognizing that t
he two variables have a very close \line \up0 \expndtw0\charscalex102 relationsh
ip. This is based on two theoretical explanations which states that: first, the
stock prices \line \up0 \expndtw-3\charscalex100 reflect information about the f

irm\u8217?s fundamental factors and therefore the fundamental condition of the \
line \up0 \expndtw-2\charscalex100 firm is a factor affecting investment d
ecision. Second, the firm may be experiencing financial \line \up0 \expnd
tw-4\charscalex100 constraint, which may hamper the firm to achieve an optimal i
nvestment plan so that the increase in the \line \up0 \expndtw0\charscalex103 st
ock price is expected to be a cheaper source of funding to be used as a targeted
investment fund \line \up0 \expndtw0\charscalex103 (Chen et al., 2005). \par\pa
rd\ql \li1295\sb0\sl-276\slmult0 \par\pard\ql\li1295\sb8\sl-276\slmult0 \up0 \ex
pndtw-5\charscalex100 \ul0\nosupersub\cf4\f5\fs24 2.1.1. Market-Timing Hypothesi
s \par\pard\qj \li1295\ri803\sb0\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \u
l0\nosupersub\cf1\f2\fs24 A manager will take advantage of mispricing by issuing
overvalued stocks to enjoy lower capital costs \up0 \expndtw0\charscalex103 and
otherwise, avoid issuing undervalued stocks to avoid high capital costs. The ex
istence of this \up0 \expndtw0\charscalex100 opportunity encourages managers to
implement investment plans. Instead, managers of undervalued \up0 \expndtw0\char
scalex100 firms avoid to issuing stock, even if they need it, because of the hig
h cost of capital in undervalued \up0 \expndtw0\charscalex100 stocks. In other w
ord, overpricing tends to make increasing investment opportunity and vice versa,
\up0 \expndtw0\charscalex100 underpricing tends to reduce the investment opport
unities. \par\pard\ql \li1295\sb268\sl-276\slmult0 \up0 \expndtw-5\charscalex100
\ul0\nosupersub\cf4\f5\fs24 2.1.2. Catering Hypothesis \par\pard\qj \li1295\ri8
03\sb5\sl-275\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf1\f2\fs24
Managers attempt to please the wishes of the investors because they want to main
tain their "reputation" \up0 \expndtw0\charscalex102 (Holmstrom, 1999), and max
imize their compensation based on stock price. As a result, when the \up0 \expnd
tw0\charscalex100 firm's stock is overvalued, managers will try to incre
ase investment to encourage the further \up0 \expndtw-3\charscalex100 overv
aluation. While, managers in firms with undervalued stock tend to reduce the inv
estment to avoid \up0 \expndtw-4\charscalex100 the further undervaluation. \par\
pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart Pg3}{\bk
mkend Pg3}\par\pard\li993\sb272\sl-276\slmult0\fi0\tx5488 \up0 \expndtw-3\charsc
alex100 \ul0\nosupersub\cf1\f2\fs24 16\tab \up0 \expndtw-3\charscalex100 \ul0\no
supersub\cf5\f6\fs24 Middle Eastern Finance and Economics - Issue 9 (2011)\par\p
ard\ql \li993\sb204\sl-276\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub
\cf4\f5\fs24 2.2. The Effect of Financial Constraints on the Relationship betwee
n Mispricing and Investment \par\pard\qj \li993\ri1105\sb145\sl-275\slmult0 \up0
\expndtw-1\charscalex100 \ul0\nosupersub\cf1\f2\fs24 The term financial constra
ints which was introduced by Fazzari et al. (1988) basically have the same \line
\up0 \expndtw-1\charscalex100 term with equity dependency (Stein, 1996, Dong et
al., 2007), both of them describe the condition of \line \up0 \expndtw-4\charsc
alex100 the firm facing difficulties to seek sources of funding. High financial
constraint firm is characterized by \line \up0 \expndtw0\charscalex100 inadequac
y of internal funds (eg, cash and retained earnings) and the difficulty in obtai
ning external \line \up0 \expndtw-3\charscalex100 capital in the form of de
bt. This situation makes the firm rely on selling of stocks to fund
its \line \up0 \expndtw-1\charscalex100 investments (Baker et al, 2003). Stein (
1996) and Dong et al. (2007) define this condition in terms of \line \up0 \expnd
tw-2\charscalex100 equity-dependent. Conversely, firms that do not experiencing
this problem are called as low financial \line \up0 \expndtw-4\charscalex100 con
straints or non-equity dependent. Kaplan and Zingales (1997) explain that fundin
g constraints could \line \up0 \expndtw-1\charscalex100 result from differences
in capital costs from internal resources and external resources. For firms with
\line \up0 \expndtw0\charscalex102 low financial constraints, they do not rely o
n stock, so the condition of mispricing (overvalued or \line \up0 \expndtw0\cha
rscalex103 undervalued) will not affect their investment decisions. In contrast
, investment decisions of high \line \up0 \expndtw-1\charscalex100 financing con
straint firms may be more sensitive to the value of its stock. From this theory,
it can be \line \up0 \expndtw-2\charscalex100 concluded that the level of fundi
ng constraints may affect the sensitivity of the effect of mispricing on \line \
up0 \expndtw-5\charscalex100 investment. \par\pard\ql \li993\sb0\sl-276\slmult0

\par\pard\ql\li993\sb9\sl-276\slmult0 \up0 \expndtw-5\charscalex100 \ul0\nosuper
sub\cf4\f5\fs24 2.3. Mispricing and Capital Structure \par\pard\qj \li993\ri1105
\sb124\sl-276\slmult0 \up0 \expndtw0\charscalex102 \ul0\nosupersub\cf1\f2\fs24 R
esearch conducted by Hovakimian et al. (2001) find that the tendency to sel
l stocks when the \up0 \expndtw0\charscalex100 condition is overvalued can be us
ed to pay off some debt to achieve the desired leverage condition. \up0 \expndtw
-2\charscalex100 Firms selling stock when the stock is overvalued making the deb
t-equity ratio become lower. Instead, \up0 \expndtw0\charscalex100 if the firms
will not sell stock when the condition is undervalued and choose another funding
source \up0 \expndtw-1\charscalex100 that is cheaper or with other consideratio
ns (for example, prefer debt) will make the debt-equity ratio \up0 \expndtw0\cha
rscalex100 becomes higher. At the same time, the increasing of equity due to ove
rvalued condition can also be \up0 \expndtw-5\charscalex100 accompanied by a sig
nificant deterioration in debt. \par\pard\ql \li993\sb0\sl-322\slmult0 \par\pard
\ql\li993\sb244\sl-322\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf6
\f7\fs28 3. Hypotheses \par\pard\qj \li993\ri3232\sb10\sl-260\slmult0\tx1713 \u
p0 \expndtw-4\charscalex100 \ul0\nosupersub\cf1\f2\fs24 Based on the theory and
previous research, we develop the following hypotheses: \line\tab \up0 \expndtw5\charscalex100 H1: Mispricing positively affect investment \par\pard\qj \li17
13\ri1106\sb4\sl-280\slmult0\tx2344 \up0 \expndtw0\charscalex103 H2: The sensi
tivity of the effect of mispricing on investment in firms with high financial \l
ine\tab \up0 \expndtw-5\charscalex100 constraints is greater than firms with low
financing constraints \par\pard\qj \li1713\ri1105\sb1\sl-280\slmult0\tx2344 \up
0 \expndtw0\charscalex104 H3: The higher (positive) level of mispricing, the
lower the debt-equity ratio, the lower \line\tab \up0 \expndtw-5\charscalex100 (
negative) level of mispricing, the higher the debt-equity ratio. \par\pard\ql \l
i993\sb0\sl-322\slmult0 \par\pard\ql\li993\sb224\sl-322\slmult0 \up0 \expndtw-4\
charscalex100 \ul0\nosupersub\cf6\f7\fs28 4. Research Method \par\pard\qj \li99
3\ri1105\sb0\sl-280\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf1\f2
\fs24 This study use the data from 2003-2007, financial report data obtained fro
m the OSIRIS database and \up0 \expndtw0\charscalex100 market data obtained from
Indonesia Stock Exchange (IDX). Samples are all manufacturing firms \up0 \expn
dtw-4\charscalex100 listed in IDX, consist of 142 firms (Indonesian Capital Mark
et Directory, 2007). \par\pard\ql \li993\sb0\sl-276\slmult0 \par\pard\ql\li993\s
b1\sl-276\slmult0 \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf4\f5\fs24 4.1.
Variables \par\pard\ql \li993\sb124\sl-276\slmult0 \up0 \expndtw-5\charscalex10
0 4.1.1. Proxy of Mispricing \par\pard\qj \li993\ri1105\sb4\sl-276\slmult0\fi0 \
up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 In several previous stu
dies (Dong et al, 2006; Bloomfield and Michaely, 2004; Bartov and Kim, 2004; \li
ne \up0 \expndtw-2\charscalex100 Baker and Wugler, 2002), mispricing proxy that
be used is the actual value of market-to-book. This is \line \up0 \expndtw-2\cha
rscalex100 different from the methods used by Rhodes et al. (2004) that break do
wn the market-to-book into two \line \up0 \expndtw-3\charscalex100 components, m
ispricing component and growth opportunities components. The concept was applied
in \line \up0 \expndtw-4\charscalex100 the case of the stock merger that are di
fferent from the context of this research. In our study, mispricing \line \up0 \
expndtw-2\charscalex100 will be measured by comparing the predicted value of mar
ket-to-book (M/BPre) with the actual value \line \up0 \expndtw-2\charscalex100 o
f market-to-book (M/BAct). The argument is that the actual value of market-to-b
ook should have \par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-24
0{\bkmkstart Pg4}{\bkmkend Pg4}\par\pard\li1295\sb272\sl-276\slmult0\fi0\tx10991
\up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf5\f6\fs24 Middle Eastern Financ
e and Economics - Issue 9 (2011)\tab \up0 \expndtw-3\charscalex100 \ul0\nosupers
ub\cf1\f2\fs24 17\par\pard\qj \li1295\ri803\sb204\sl-276\slmult0\fi0 \up0 \expnd
tw-1\charscalex100 reflected the company's fundamental factors, but due to the n
on-fundamental factors, it is possible that \up0 \expndtw-1\charscalex100 the ac
tual value is not as it should be. Therefore, the difference between the predict
ed value and actual \up0 \expndtw-1\charscalex100 market-to-book can be used as
an indicator of mispricing. Model prediction of market-to-book value is \up0 \ex
pndtw0\charscalex100 formed based on fundamental factors. We use several fundame

ntal factors that are Earning Per Share \up0 \expndtw-2\charscalex100 (EPS), Pri
ce Earning Ratio (PER), Return on Equity (ROE), Return on Assets (ROA), Dividend
Payout \up0 \expndtw-3\charscalex100 Ratio (DPR), Price to Sales (PTS), Price t
o Free Cash Flow (PTFCF). \par\pard\ql \li2015\sb33\sl-241\slmult0 \up0 \expndtw
-3\charscalex100 M/B\ul0\sub\cf7\f8\fs24 Pr \par\pard\ql \li2596\sb7\sl-184\slmu
lt0 \up0 \expndtw-2\charscalex100 e \par\pard\li2054\sb23\sl-299\slmult0\fi0\tx2
236\tx2572\tx2767\tx3715\tx3909\tx4168\tx4893\tx5087\tx6100\tx6295\tx6556\tx7295
\tx7490\tx7744\tx8500\tx8680\tx9439\tx9619\tx9856\tx10687\tx10852 \up0 \expndtw5\charscalex100 \ul0\nosupersub\cf10\f11\fs26 \u-4035?\tab \up0 \expndtw-5\chars
calex100 \ul0\nosupersub\cf13\f14\fs26 \u-3999?\t \dn3 \expndtw-3\charscalex100
\ul0\nosupersub\cf8\f9\fs15 0\tab \up0 \expndtw-5\charscalex100 \ul0\nosupersub\
cf10\f11\fs26 \u-4053?\tab \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf13\f1
4\fs26 \u-3998?\t \dn3 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs15 1\t
\up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf12\f13\fs26 EPS\t \dn3 \expndtw3\charscalex100 \ul0\nosupersub\cf11\f12\fs15 t\t \dn3 \expndtw-6\charscalex75 \
ul0\nosupersub\cf9\f10\fs15 \u-4051? \ul0\nosupersub\cf8\f9\fs15 1\tab \up0 \exp
ndtw-5\charscalex100 \ul0\nosupersub\cf10\f11\fs26 \u-4053?\tab \up0 \expndtw-4\
charscalex100 \ul0\nosupersub\cf13\f14\fs26 \u-3998?\ul0\nosupersub\cf8\f9\fs15
2\tab \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf12\f13\fs26 PER\t \dn3 \ex
pndtw-3\charscalex100 \ul0\nosupersub\cf11\f12\fs15 t\ul0\nosupersub\cf9\f10\fs1
5 \u-4051?\t \dn3 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs15 1\tab \up
0 \expndtw-5\charscalex100 \ul0\nosupersub\cf10\f11\fs26 \u-4053?\tab \up0 \expn
dtw-5\charscalex100 \ul0\nosupersub\cf13\f14\fs26 \u-3998?\t \dn3 \expndtw-3\cha
rscalex100 \ul0\nosupersub\cf8\f9\fs15 3\t \up0 \expndtw-5\charscalex100 \ul0\no
supersub\cf12\f13\fs26 ROE\t \dn3 \expndtw-3\charscalex100 \ul0\nosupersub\cf11\
f12\fs15 t\t \dn3 \expndtw-6\charscalex75 \ul0\nosupersub\cf9\f10\fs15 \u-4051?
\ul0\nosupersub\cf8\f9\fs15 1\tab \up0 \expndtw-5\charscalex100 \ul0\nosupersub\
cf10\f11\fs26 \u-4053?\tab \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf13\f1
4\fs26 \u-3998?\ul0\nosupersub\cf8\f9\fs15 4\tab \up0 \expndtw-5\charscalex100 \
ul0\nosupersub\cf12\f13\fs26 ROA\t \dn3 \expndtw-3\charscalex100 \ul0\nosupersub
\cf11\f12\fs15 t\t \dn3 \expndtw-6\charscalex75 \ul0\nosupersub\cf9\f10\fs15 \u4051? \ul0\nosupersub\cf8\f9\fs15 1\tab \up0 \expndtw-5\charscalex100 \ul0\nosup
ersub\cf10\f11\fs26 \u-4053?\tab \up0 \expndtw-4\charscalex100 \ul0\nosupersub\c
f13\f14\fs26 \u-3998?\ul0\nosupersub\cf8\f9\fs15 5\tab \up0 \expndtw-5\charscale
x100 \ul0\nosupersub\cf12\f13\fs26 DPR\t \dn3 \expndtw-3\charscalex100 \ul0\nosu
persub\cf11\f12\fs15 t\t \dn3 \expndtw-6\charscalex75 \ul0\nosupersub\cf9\f10\fs
15 \u-4051? \ul0\nosupersub\cf8\f9\fs15 1\tab \up0 \expndtw-5\charscalex100 \ul0
\nosupersub\cf15\f16\fs24 \u-4053?\tab \up0 \expndtw-5\charscalex100 \ul0\nosupe
rsub\cf14\f15\fs24 \u-3998?\t \dn2 \expndtw-3\charscalex100 \ul0\nosupersub\cf17
\f18\fs14 6\t \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf5\f6\fs24 PS\t \dn
2 \expndtw-3\charscalex100 \ul0\nosupersub\cf18\f19\fs14 t\t \dn2 \expndtw-3\cha
rscalex100 \ul0\nosupersub\cf16\f17\fs14 \u-4051?\ul0\nosupersub\cf17\f18\fs14 1
\tab \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf15\f16\fs24 \u-4053?\tab \u
p0 \expndtw-5\charscalex100 \ul0\nosupersub\cf14\f15\fs24 \u-3998?\t \dn2 \expnd
tw-3\charscalex100 \ul0\nosupersub\cf17\f18\fs14 7\tab \up0 \expndtw-5\charscale
x100 \ul0\nosupersub\cf5\f6\fs24 PFCF\t \dn2 \expndtw-3\charscalex100 \ul0\nosup
ersub\cf18\f19\fs14 t\t \dn2 \expndtw-3\charscalex100 \ul0\nosupersub\cf16\f17\f
s14 \u-4051?\ul0\nosupersub\cf17\f18\fs14 1\tab \up0 \expndtw-5\charscalex100 \u
l0\nosupersub\cf15\f16\fs24 \u-4053?\tab \up0 \expndtw-5\charscalex100 \ul0\nosu
persub\cf14\f15\fs24 \u-3995?\par\pard\li2015\sb70\sl-276\slmult0\fi8248 \up0 \e
xpndtw-2\charscalex100 \ul0\nosupersub\cf19\f20\fs24 (Model 1)\par\pard\li2015\s
b0\sl-276\slmult0\fi0\tx2735 \up0 \expndtw-2\charscalex100 EPS\tab \up0 \expndtw
-2\charscalex100 = Earning Per Share (Net income/shares outstanding)\par\pard\li
2015\sb0\sl-276\slmult0\fi0\tx2735 \up0 \expndtw-2\charscalex100 PER\tab \up0 \e
xpndtw-2\charscalex100 = Price Earning Ratio (Market stock price/EPS)\par\pard\l
i2015\sb0\sl-276\slmult0\fi0\tx2735 \up0 \expndtw-2\charscalex100 ROE\tab \up0 \
expndtw-2\charscalex100 = Return on Equity (Net income/equity)\par\pard\li2015\s
b0\sl-276\slmult0\fi0\tx2735 \up0 \expndtw-2\charscalex100 ROA\tab \up0 \expndtw
-2\charscalex100 = Return on Asset (Net income/total asset)\par\pard\li2015\sb0\
sl-276\slmult0\fi0\tx2735 \up0 \expndtw-2\charscalex100 DPR\tab \up0 \expndtw-2\

charscalex100 = Dividend Payout Ratio (1-Plowback ratio)\par\pard\li2015\sb0\sl276\slmult0\fi0\tx2735 \up0 \expndtw-2\charscalex100 PS\tab \up0 \expndtw-2\char
scalex100 = Price to Sales (Market stock price/(sales/shares))\par\pard\qj \li20
15\ri1302\sb0\sl-280\slmult0 \up0 \expndtw-3\charscalex100 PFCF = Price to Free
Cashflow (Market stock price/(Free Cash Flow/shares outstanding)) \up0 \expndtw
-3\charscalex100 While the actual value of market-to-book will be calculated by
following formula:\par\pard\sect\sectd\sbknone\cols2\colno1\colw3012\colsr40\col
no2\colw9048\colsr160\ql \li2054\sb154\sl-276\slmult0 \up0 \expndtw-4\charscalex
100 \ul0\nosupersub\cf20\f21\fs24 M/B\ul0\sub\cf21\f22\fs21 Act\ul0\nosupersub\
cf22\f23\fs24 \u-4035?\par\pard\column \ql \li20\sb5\sl-276\slmult0 \up0 \expn
dtw-3\charscalex100 \ul0\nosupersub\cf20\f21\fs24 Market \up0 \expndtw-2\charsca
lex100 value \up0 \expndtw-2\charscalex100 of \up0 \expndtw-3\charscalex100 shar
e\par\pard\ql \li112\sb60\sl-276\slmult0 \up0 \expndtw-3\charscalex100 Book \up0
\expndtw-2\charscalex100 value \up0 \expndtw-2\charscalex100 of \up0 \expndtw-3
\charscalex100 share \par\pard\sect\sectd\sbknone \qj \li2016\ri5174\sb37\sl-280
\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf19\f20\fs24 Thus, mispr
icing will be measured by the formula: \up0 \expndtw-2\charscalex100 Mispricing
(MIS) = (M/B\ul0\sub\cf7\f8\fs24 Akt\ul0\nosupersub\cf19\f20\fs24 ) - (M/B\ul0\s
ub\cf7\f8\fs24 Pre\ul0\nosupersub\cf19\f20\fs24 ) \par\pard\ql \li1295\sb0\sl-27
6\slmult0 \par\pard\ql\li1295\sb8\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \
ul0\nosupersub\cf4\f5\fs24 4.1.2. Sample Clasification based on Financial Constr
aints \par\pard\qj \li1295\ri804\sb0\sl-280\slmult0 \up0 \expndtw0\charscalex104
\ul0\nosupersub\cf19\f20\fs24 Sample classification based on financial constrai
nts refers to Kaaro (2004), Kaplan and Zingales \up0 \expndtw-2\charscalex100
(1997) and Cleary (1999). The steps are as follows: \par\pard\ql \li1655\ri803\
sb0\sl-273\slmult0\tx2015\tx2015\tx2015\tx2015 \up0 \expndtw-3\charscalex100 a.
\tab \up0 \expndtw-1\charscalex100 Grouping initial sample based on the payment
of dividends. Firms that pay dividends included \line\tab \up0 \expndtw0\charsca
lex104 in the category of low financial constraints (LFC), while firms that do
not pay a dividend \line \tab \up0 \expndtw-2\charscalex100 included in the cate
gory of high financial constraints (HFC). LFC group will be given the score \lin
e \tab \up0 \expndtw-3\charscalex100 1 and score 0 for HFC. \par\pard\ql \li1656
\sb0\sl-266\slmult0\tx2015 \up0 \expndtw-4\charscalex100 b. \tab \up0 \expndtw-3
\charscalex100 Establishing logit model to predict financial constraints based o
n financial variables. \par\pard\li2056\sb66\sl-276\slmult0\fi854\tx3199\tx3444\
tx3573 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf30\f31\fs24 \u-1813?\tab
\up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf25\f26\fs24 P\tab \dn2 \expndtw3\charscalex100 \ul0\nosupersub\cf24\f25\fs14 i\tab \up0 \expndtw-3\charscalex10
0 \ul0\nosupersub\cf30\f31\fs24 \u-1802?\par\pard\sect\sectd\sbknone\cols4\colno
1\colw4080\colsr110\colno2\colw2015\colsr20\colno3\colw2094\colsr40\colno4\colw3
761\colsr160\ql \li2056\sb0\sl-216\slmult0\tx2478\tx3705 \up0 \expndtw-3\charsca
lex100 \ul0\nosupersub\cf25\f26\fs24 FC\tab \up0 \expndtw-3\charscalex100 \ul0\n
osupersub\cf29\f30\fs24 \u-4035? \up0 \expndtw-3\charscalex100 \ul0\nosupersub\c
f25\f26\fs24 Ln\tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf29\f30\fs24
\u-4035? \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf28\f29\fs24 \u-3999?\pa
r\pard\column \ql \li20\sb0\sl-216\slmult0 \up0 \expndtw-3\charscalex100 \ul0\no
supersub\cf29\f30\fs24 \u-4053? \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf
28\f29\fs24 \u-3998? \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf25\f26\fs24
CR \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf29\f30\fs24 \u-4053? \up0 \e
xpndtw-3\charscalex100 \ul0\nosupersub\cf28\f29\fs24 \u-3998? \up0 \expndtw-6\ch
arscalex100 \ul0\nosupersub\cf25\f26\fs24 PROFIT\par\pard\column \ql \li20\sb0\s
l-216\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf29\f30\fs24 \u-405
3? \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf28\f29\fs24 \u-3998? \up0 \ex
pndtw-3\charscalex100 \ul0\nosupersub\cf25\f26\fs24 CP \up0 \expndtw-3\charscale
x100 \ul0\nosupersub\cf29\f30\fs24 \u-4053? \up0 \expndtw-3\charscalex100 \ul0\n
f25\f26\fs24 SLACK \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf29\f30\fs24 \
u-4053?\par\pard\column \ql \li20\sb0\sl-216\slmult0\tx1950 \up0 \expndtw-3\char
scalex100 \ul0\nosupersub\cf28\f29\fs24 \u-3998? \up0 \expndtw-3\charscalex100 \
ul0\nosupersub\cf25\f26\fs24 RE \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf

\u-3995? \tab \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf19\f20\fs24 (Mode
l 2)\par\pard\sect\sectd\sbknone\cols4\colno1\colw2610\colsr20\colno2\colw119\co
lsr40\colno3\colw950\colsr20\colno4\colw8361\colsr160\ql \li2359\sb0\sl-126\slmu
lt0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf24\f25\fs14 i\par\pard\ql \l
i2056\sb108\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf32\f3
3\fs24 Z \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf35\f36\fs24 \u-4035? \u
p0 \expndtw-5\charscalex100 \ul0\nosupersub\cf34\f35\fs24 \u-3999?\par\pard\colu
mn \ql \li2630\sb0\sl-133\slmult0 \par\pard\ql \li2630\sb0\sl-133\slmult0 \par\p
ard\ql \li2630\sb0\sl-133\slmult0 \par\pard\ql \li20\sb0\sl-133\slmult0 \up0 \ex
pndtw-2\charscalex100 \ul0\nosupersub\cf33\f34\fs14 0\par\pard\column \ql \li152
\sb0\sl-216\slmult0\tx774 \up0 \expndtw0\charscalex80 \ul0\nosupersub\cf30\f31\f
s24 \u-1812? \tab \up0 \expndtw0\charscalex80 \u-1801?\par\pard\ql \li152\sb0\sl
-216\slmult0 \up0 \expndtw0\charscalex80 \u-1811? \up0 \expndtw-3\charscalex100
\ul0\nosupersub\cf27\f28\fs24 1 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf
29\f30\fs24 \u-4051? \up0 \expndtw0\charscalex59 \ul0\nosupersub\cf25\f26\fs24 P
\ul0\nosupersub\cf24\f25\fs14 i \up0 \expndtw0\charscalex80 \ul0\nosupersub\cf3
0\f31\fs24 \u-1800?\par\pard\ql \li20\sb0\sl-216\slmult0 \up0 \expndtw-3\charsca
lex100 \ul0\nosupersub\cf35\f36\fs24 \u-4053? \up0 \expndtw-3\charscalex100 \ul0
\nosupersub\cf34\f35\fs24 \u-3998? \up0 \expndtw-3\charscalex100 \ul0\nosupersub
\cf32\f33\fs24 FC\par\pard\ql \li346\sb0\sl-126\slmult0\tx752 \up0 \expndtw-2\ch
arscalex100 \ul0\nosupersub\cf33\f34\fs14 1\tab \up0 \expndtw-2\charscalex100 \u
l0\nosupersub\cf31\f32\fs14 i\ul0\nosupersub\cf33\f34\fs14 , \up0 \expndtw-2\cha
rscalex100 \ul0\nosupersub\cf31\f32\fs14 t\par\pard\ql \li24\sb0\sl-216\slmult0\
tx812 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf19\f20\fs24 1 \tab \up0 \e
xpndtw-3\charscalex100 \ul0\nosupersub\cf32\f33\fs24 e\par\pard\column \ql \li32
0\sb0\sl-126\slmult0\tx793\tx1544\tx2830\tx3586\tx4769\tx5501 \up0 \expndtw-2\ch
arscalex100 \ul0\nosupersub\cf26\f27\fs14 0\tab \up0 \expndtw-2\charscalex100 1\
tab \up0 \expndtw-2\charscalex100 2\tab \up0 \expndtw-2\charscalex100 3\tab \up0
\expndtw-2\charscalex100 4\tab \up0 \expndtw-2\charscalex100 5\tab \up0 \expndt
w-2\charscalex100 \ul0\nosupersub\cf24\f25\fs14 i \up0 \expndtw-2\charscalex100
\ul0\nosupersub\cf26\f27\fs14 ,\ul0\nosupersub\cf24\f25\fs14 t\par\pard\ql \li37
39\sb0\sl-161\slmult0 \par\pard\ql \li3739\sb0\sl-161\slmult0 \par\pard\ql \li37
39\sb0\sl-161\slmult0 \par\pard\ql \li20\sb20\sl-161\slmult0 \up0 \expndtw-2\cha
rscalex100 \ul0\nosupersub\cf31\f32\fs14 Z\par\pard\sect\sectd\sbknone\cols3\col
no1\colw2273\colsr40\colno2\colw631\colsr20\colno3\colw9146\colsr160\ql \li2059\
sb0\sl-216\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf32\f33\fs24 P
\par\pard\ql \li2174\sb0\sl-126\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosup
ersub\cf31\f32\fs14 i\par\pard\column \ql \li20\sb0\sl-216\slmult0 \up0 \expndtw
-3\charscalex100 \ul0\nosupersub\cf35\f36\fs24 \u-4035?\par\pard\ql \li210\sb0\s
l-216\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf19\f20\fs24 1 \up0
\expndtw-3\charscalex100 \ul0\nosupersub\cf35\f36\fs24 \u-4053? \up0 \expndtw-5
\charscalex100 \ul0\nosupersub\cf32\f33\fs24 e\par\pard\column \ql \li315\sb0\sl
-216\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf35\f36\fs24 \u-4035
?\par\pard\ql \li20\sb0\sl-126\slmult0\tx961 \up0 \expndtw0\charscalex103 \ul0\n
osupersub\cf16\f17\fs14 \u-4051?\ul0\nosupersub\cf31\f32\fs14 Z\tab \up0 \expndt
w-2\charscalex100 Z\par\pard\ql \li505\sb0\sl-216\slmult0 \up0 \expndtw-3\charsc
alex100 \ul0\nosupersub\cf19\f20\fs24 1 \up0 \expndtw-3\charscalex100 \ul0\nosup
ersub\cf35\f36\fs24 \u-4053? \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf32\
f33\fs24 e \par\pard\sect\sectd\sbknone \li2015\sb0\sl-216\slmult0\fi0\tx4536 \u
p0 \expndtw-2\charscalex100 FC\tab \up0 \expndtw-2\charscalex100 =\ul0\nosupersu
b\cf19\f20\fs24 Financial Constraints\par\pard\sect\sectd\sbknone \li2015\sb0\s
l-216\slmult0\fi0\tx4535 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf32\f33\
fs24 CR\ul0\nosupersub\cf19\f20\fs24 (Current Ratio)\tab \up0 \expndtw-2\charsc
alex100 = Current Asset/Current Liability\par\pard\sect\sectd\sbknone \li2015\sb
0\sl-216\slmult0\fi0\tx4535 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf32\f
33\fs24 PROFIT\tab \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf19\f20\fs24 =
Operation Profit/Total Asset\par\pard\sect\sectd\sbknone \li2015\sb0\sl-216\slm
ult0\fi0\tx4535 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf32\f33\fs24 CP\u
l0\nosupersub\cf19\f20\fs24 (Change of Profit)\tab \up0 \expndtw-2\charscalex10

0 = Positive change: 1, Negative change: 0\par\pard\sect\sectd\sbknone \li2015
\sb1\sl-221\slmult0\fi0\tx4535 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf3
2\f33\fs24 SLACK\tab \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf19\f20\fs24
= [Cash+ Short Term Investment + Inventory + Receivables - Short\par\pard\li201
5\sb10\sl-276\slmult0\fi2699 \up0 \expndtw-2\charscalex100 Term Debt]/Asset\par\
pard\li2015\sb0\sl-276\slmult0\fi0\tx4535 \up0 \expndtw-2\charscalex100 \ul0\nos
upersub\cf32\f33\fs24 RE\ul0\nosupersub\cf19\f20\fs24 (Retained Earnings)\tab \
up0 \expndtw-2\charscalex100 = Retained Earnings/Aset\par\pard\li2015\sb0\sl-276
\slmult0\fi0\tx4535 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf32\f33\fs24
Pi\tab \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf19\f20\fs24 = Probability
\par\pard\li2015\sb0\sl-276\slmult0\fi0\tx4536 \up0 \expndtw-2\charscalex100 \ul
0\nosupersub\cf32\f33\fs24 e\tab \up0 \expndtw-2\charscalex100 = \ul0\nosupersub
\cf19\f20\fs24 Exponential\ul0\nosupersub\cf32\f33\fs24 \ul0\nosupersub\cf19\f2
0\fs24 Value\par\pard\ql \li1655\ri816\sb1\sl-270\slmult0\tx2015\tx2015\tx2015 \
up0 \expndtw-3\charscalex100 c. \tab \up0 \expndtw-3\charscalex100 When the prob
ability Pi is greater than the probability cut-off (P> Pc) the firm into the cat
egory \line\tab \up0 \expndtw-3\charscalex100 of LFC (1), if Pi <Pc, the firm in
to category of HFC (0). Determination of cut-off value is based \line \tab \up0
\expndtw-4\charscalex100 on observation of actual dividend policy.
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g5}{\bkmkend Pg5}\par\pard\li993\sb272\sl-276\slmult0\fi0\tx5488 \up0 \expndtw-2
\charscalex100 \ul0\nosupersub\cf19\f20\fs24 18\tab \up0 \expndtw-2\charscalex10
0 \ul0\nosupersub\cf32\f33\fs24 Middle Eastern Finance and Economics - Issue 9 (
2011)\par\pard\li993\sb218\sl-276\slmult0\fi0 \up0 \expndtw-2\charscalex100 \ul0
\nosupersub\cf4\f5\fs24 4.1.3. Investment\par\pard\li993\sb0\sl-271\slmult0\fi0
\up0 \expndtw-1\charscalex100 \ul0\nosupersub\cf19\f20\fs24 Investment expenditu
re (INV) of firms will be calculated using the following formula (Kaaro, 2004):\
par\pard\sect\sectd\sbknone\cols2\colno1\colw2524\colsr60\colno2\colw9516\colsr1
60\ql \li1764\sb162\sl-276\slmult0\tx2334 \up0 \expndtw-3\charscalex100 \ul0\nos
upersub\cf37\f38\fs24 INV \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf36\f37
\fs14 t\tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf29\f30\fs24 \u-4035?
\par\pard\column \ql \li20\sb11\sl-276\slmult0 \up0 \expndtw-2\charscalex100 \ul
0\nosupersub\cf37\f38\fs24 Investment \up0 \expndtw-2\charscalex100 CashFlow \up
0 \expndtw-3\charscalex100 \ul0\nosupersub\cf36\f37\fs14 t\par\pard\ql \li243\sb
62\sl-276\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf37\f38\fs24 Ne
tFixedAs \up0 \expndtw-2\charscalex100 sets \up0 \expndtw-8\charscalex96 \ul0\no
supersub\cf36\f37\fs14 t \ul0\nosupersub\cf38\f39\fs14 \u-4051? \up0 \expndtw-2\
charscalex100 \ul0\nosupersub\cf36\f37\fs14 1 \par\pard\sect\sectd\sbknone \qj \
li993\ri1105\sb32\sl-280\slmult0\fi719 \up0 \expndtw0\charscalex105 \ul0\nosuper
sub\cf19\f20\fs24 Investment cash flow is used to measure the net capital expend
iture. The value of net fixed \up0 \expndtw0\charscalex100 assets use the net as
set value at the beginning of the period, while the value of the investment use
the \up0 \expndtw-1\charscalex100 value at end of period (Vogt, 1994; Kaplan and
Zingales, 1997; Cleary, 1999). \par\pard\ql \li993\sb0\sl-276\slmult0 \par\pard
\ql\li993\sb8\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f
5\fs24 4.1.4. Capital Structure \par\pard\qj \li993\ri1105\sb0\sl-280\slmult0 \u
p0 \expndtw-1\charscalex100 \ul0\nosupersub\cf19\f20\fs24 The proxy of capital s
tructure employs the ratio of debt to equity (D / E) which will be calculated us
ing \up0 \expndtw-2\charscalex100 the formula:\par\pard\sect\sectd\sbknone\cols2
\colno1\colw2964\colsr40\colno2\colw9096\colsr160\ql \li1759\sb153\sl-276\slmult
0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf37\f38\fs24 D/E \up0 \expndtw3\charscalex100 Ratio \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf29\f30\fs2
4 \u-4035?\par\pard\column \ql \li102\sb5\sl-276\slmult0 \up0 \expndtw-2\charsca
lex100 \ul0\nosupersub\cf37\f38\fs24 Total \up0 \expndtw-3\charscalex100 Debt\pa
r\pard\ql \li20\sb60\sl-276\slmult0 \up0 \expndtw-2\charscalex100 Total \up0 \ex
pndtw-2\charscalex100 Equity \par\pard\sect\sectd\sbknone \ql \li993\sb0\sl-276\
slmult0 \par\pard\ql\li993\sb52\sl-276\slmult0 \up0 \expndtw-5\charscalex100 \ul
0\nosupersub\cf4\f5\fs24 4.1.5. Control Variables \par\pard\qj \li993\ri1106\sb0
\sl-280\slmult0 \up0 \expndtw-1\charscalex100 \ul0\nosupersub\cf19\f20\fs24 Besi
des the main variables, this research employs some control variables that are Le
verage (debt/total \line \up0 \expndtw-3\charscalex100 asset), Cash Flow (cas
h flow/total asset), Cash (cash and equivalent cash/total asset), Sales
\up0 \expndtw-5\charscalex100 (net \par\pard\ql \li993\sb1\sl-257\slmult0 \up0
\expndtw-3\charscalex100 sales/total asset), Year (age of the firms), TAR (Tangi
ble to Asset Ratio) and Size (In total asset). \par\pard\ql \li993\sb0\sl-276\sl
mult0 \par\pard\ql\li993\sb12\sl-276\slmult0 \up0 \expndtw-5\charscalex100 \ul0\
nosupersub\cf4\f5\fs24 4.2. Hypotheses Testing \par\pard\ql \li993\sb124\sl-276\
slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf19\f20\fs24 Then, to tes
t the hypotheses, we use following models: \par\pard\ql \li993\sb0\sl-276\slmult
0 \par\pard\ql\li993\sb8\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosup
ersub\cf4\f5\fs24 Model to Test the H1\par\pard\sect\sectd\sbknone\cols3\colno1\
colw3907\colsr40\colno2\colw2646\colsr160\colno3\colw5357\colsr160\ql \li1763\sb
52\sl-310\slmult0\tx3194\tx3669 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf
41\f42\fs27 Investment\tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf42\f4
3\fs27 \u-4035? \up0 \expndtw-12\charscalex96 \ul0\nosupersub\cf40\f41\fs27 \u94
5? \tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf42\f43\fs27 \u-4053?\par
\pard\column \ql \li20\sb52\sl-310\slmult0\tx1105 \up0 \expndtw-12\charscalex93
\ul0\nosupersub\cf40\f41\fs27 \u946? \up0 \expndtw-3\charscalex100 \ul0\nosupers
ub\cf41\f42\fs27 MIS\tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf42\f43\
fs27 \u-4053? \up0 \expndtw-12\charscalex93 \ul0\nosupersub\cf40\f41\fs27 \u946?
\up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf41\f42\fs27 Cashflow\par\pard\c
olumn \ql \li20\sb52\sl-310\slmult0\tx827\tx1528\tx3244 \up0 \expndtw-3\charscal
ex100 \ul0\nosupersub\cf42\f43\fs27 \u-4053? \up0 \expndtw-12\charscalex93 \ul0\
nosupersub\cf40\f41\fs27 \u946? \tab \up0 \expndtw-2\charscalex100 \ul0\nosupers
ub\cf41\f42\fs27 Year\tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf42\f43
\fs27 \u-4053? \up0 \expndtw-12\charscalex95 \ul0\nosupersub\cf40\f41\fs27 \u949
? \tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf19\f20\fs24 (Model 3)\par
\pard\sect\sectd\sbknone\cols4\colno1\colw4414\colsr160\colno2\colw2632\colsr20\
colno3\colw791\colsr40\colno4\colw4063\colsr160\ql \li2976\sb0\sl-144\slmult0\tx
3554\tx4077 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf39\f40\fs16 i,t\tab
\up0 \expndtw-2\charscalex100 0\tab \up0 \expndtw-2\charscalex100 1\par\pard\ql
\li1754\sb129\sl-253\slmult0\tx2930\tx3378\tx3767 \up0 \expndtw-2\charscalex100
\ul0\nosupersub\cf45\f46\fs22 Investment\tab \up0 \expndtw-3\charscalex100 \ul0\
nosupersub\cf47\f48\fs22 \u-4035? \up0 \expndtw-10\charscalex96 \ul0\nosupersub\
cf46\f47\fs22 \u945? \tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf47\f48
? \tab \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf45\f46\fs22 MIS\par\pard\
column \ql \li92\sb0\sl-144\slmult0\tx848\tx1986\tx2517 \up0 \expndtw-2\charscal
ex100 \ul0\nosupersub\cf39\f40\fs16 i,t \up0 \expndtw0\charscalex100 \ul0\nosupe
rsub\cf44\f45\fs16 \u-4051?\ul0\nosupersub\cf39\f40\fs16 1\tab \up0 \expndtw-2\c
harscalex100 2\tab \up0 \expndtw-2\charscalex100 i,t \tab \up0 \expndtw-2\charsc

alex100 3\par\pard\ql \li20\sb129\sl-253\slmult0\tx426\tx1887 \up0 \expndtw-3\ch
arscalex100 \ul0\nosupersub\cf47\f48\fs22 \u-4053? \up0 \expndtw-10\charscalex93
\ul0\nosupersub\cf46\f47\fs22 \u946? \tab \up0 \expndtw-2\charscalex100 \ul0\no
supersub\cf45\f46\fs22 Cashflow \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf
\u946? \tab \up0 \expndtw-3\charscalex100 \u8721? \up0 \expndtw-2\charscalex100
\ul0\nosupersub\cf45\f46\fs22 Year\par\pard\column \ql \li30\sb0\sl-360\slmult0
\up0 \expndtw0\charscalex97 \ul0\nosupersub\cf43\f44\fs40 \u8721?\par\pard\ql \
li150\sb0\sl-144\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf39\f40\
fs16 t\par\pard\ql \li20\sb0\sl-198\slmult0\tx443 \up0 \expndtw-3\charscalex100
\ul0\nosupersub\cf47\f48\fs22 \u-4053? \up0 \expndtw-10\charscalex93 \ul0\nosupe
rsub\cf46\f47\fs22 \u946? \tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4
5\f46\fs22 Lev\par\pard\column \ql \li20\sb0\sl-144\slmult0\tx551 \up0 \expndtw2\charscalex100 \ul0\nosupersub\cf39\f40\fs16 i,t\tab \up0 \expndtw-2\charscalex
100 i,t\par\pard\ql \li361\sb129\sl-253\slmult0\tx767 \up0 \expndtw-3\charscalex
100 \ul0\nosupersub\cf47\f48\fs22 \u-4053? \up0 \expndtw-10\charscalex93 \ul0\no
supersub\cf46\f47\fs22 \u946? \tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub
\cf45\f46\fs22 Cash\par\pard\sect\sectd\sbknone\cols4\colno1\colw3977\colsr160\c
olno2\colw2706\colsr160\colno3\colw2819\colsr160\colno4\colw2138\colsr160\ql \li
2699\sb0\sl-198\slmult0\tx3206\tx3657 \up0 \expndtw0\charscalex63 i, t\tab \up0
\expndtw-3\charscalex100 0\tab \up0 \expndtw-3\charscalex100 1\par\pard\ql \li17
47\sb0\sl-198\slmult0\tx2157\tx2838 \up0 \expndtw-3\charscalex100 \ul0\nosupersu
b\cf47\f48\fs22 \u-4053? \up0 \expndtw-10\charscalex93 \ul0\nosupersub\cf46\f47\
fs22 \u946? \tab \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf45\f46\fs22 Sal
es\tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf47\f48\fs22 \u-4053? \up0
\expndtw-3\charscalex100 \u-3995?\par\pard\column \ql \li20\sb0\sl-198\slmult0\
tx750\tx1681\tx2190 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf45\f46\fs22
i, \up0 \expndtw-3\charscalex100 t \up0 \expndtw-10\charscalex81 \ul0\nosupersub
\cf47\f48\fs22 \u-4051? \ul0\nosupersub\cf45\f46\fs22 1\tab \up0 \expndtw-3\char
scalex100 2\tab \up0 \expndtw-2\charscalex100 i, \up0 \expndtw-3\charscalex100 t
\tab \up0 \expndtw-3\charscalex100 3\par\pard\column \ql \li20\sb0\sl-198\slmult
0\tx534\tx975\tx1695\tx2247 \up0 \expndtw-10\charscalex69 i, t\tab \up0 \expndtw
-3\charscalex100 4\tab \up0 \expndtw0\charscalex63 i, t \up0 \expndtw-3\charscal
ex100 \ul0\nosupersub\cf47\f48\fs22 \u-4051? \up0 \expndtw-3\charscalex100 \ul0\
nosupersub\cf45\f46\fs22 1\tab \up0 \expndtw-3\charscalex100 5\tab \up0 \expndtw
-2\charscalex100 i, \up0 \expndtw-3\charscalex100 t \up0 \expndtw-10\charscalex8
1 \ul0\nosupersub\cf47\f48\fs22 \u-4051? \ul0\nosupersub\cf45\f46\fs22 1\par\par
d\column \ql \li20\sb0\sl-216\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosuper
sub\cf19\f20\fs24 (Model 4) \par\pard\sect\sectd\sbknone \li2025\sb0\sl-198\slmu
lt0\fi0\tx2620\tx3100 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf45\f46\fs2
2 6\tab \up0 \expndtw-5\charscalex100 i,\t \up0 \expndtw-2\charscalex100 t\tab \
dn3 \expndtw-2\charscalex100 i,t\par\pard\ql \li993\sb57\sl-276\slmult0 \up0 \ex
pndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs24 Model to Test the H2\par\pard\
sect\sectd\sbknone\cols4\colno1\colw3745\colsr20\colno2\colw1982\colsr20\colno3\
colw2304\colsr20\colno4\colw4029\colsr160\ql \li1756\sb46\sl-264\slmult0\tx2946\
tx5316 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf50\f51\fs23 Investment \u
p0 \expndtw-3\charscalex100 \ul0\nosupersub\cf48\f49\fs13 i,t\tab \up0 \expndtw2\charscalex100 \ul0\nosupersub\cf51\f52\fs23 \u-4035? \up0 \expndtw-8\charscale
x96 \ul0\nosupersub\cf49\f50\fs23 \u945? \up0 \expndtw-2\charscalex100 \ul0\nosu
persub\cf48\f49\fs13 0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf51\f52\fs
23 \u-4053? \up0 \expndtw-8\charscalex71 \ul0\nosupersub\cf49\f50\fs23 \u946? \u
l0\nosupersub\cf48\f49\fs13 1 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf50
\f51\fs23 MIS \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf48\f49\fs13 i,t \u
p0 \expndtw-3\charscalex100 \ul0\nosupersub\cf53\f54\fs13 \u-4051?\ul0\nosupersu
b\cf48\f49\fs13 1 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf51\f52\fs23 \u
-4053? \up0 \expndtw-8\charscalex91 \ul0\nosupersub\cf49\f50\fs23 \u946? \up0 \e
xpndtw-4\charscalex100 \ul0\nosupersub\cf48\f49\fs13 2 \up0 \expndtw-4\charscale
x100 \ul0\nosupersub\cf50\f51\fs23 KP \up0 \expndtw-8\charscalex77 \ul0\nosupers
ub\cf48\f49\fs13 I, T \tab \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf51\f5
2\fs23 \u-4053? \up0 \expndtw-8\charscalex91 \ul0\nosupersub\cf49\f50\fs23 \u946

? \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf48\f49\fs13 3 \up0 \expndtw-4\
charscalex100 \ul0\nosupersub\cf50\f51\fs23 MIS \up0 \expndtw-4\charscalex100 *
\up0 \expndtw-4\charscalex100 FC \up0 \expndtw-4\charscalex100 \ul0\nosupersub\c
f48\f49\fs13 i,t \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf51\f52\fs23 \u4053? \up0 \expndtw-8\charscalex91 \ul0\nosupersub\cf49\f50\fs23 \u946? \up0 \ex
pndtw-4\charscalex100 \ul0\nosupersub\cf48\f49\fs13 4 \up0 \expndtw-4\charscalex
100 \ul0\nosupersub\cf50\f51\fs23 Cashflow \up0 \expndtw-4\charscalex100 \ul0\no
supersub\cf48\f49\fs13 i,t\par\pard\column \ql \li1965\sb46\sl-264\slmult0 \up0
\expndtw-5\charscalex100 \ul0\nosupersub\cf51\f52\fs23 \u-4053? \up0 \expndtw-10
\charscalex96 \ul0\nosupersub\cf49\f50\fs23 \u946?\ul0\nosupersub\cf48\f49\fs13
5 \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf52\f53\fs34 \u8721? \up0 \expn
dtw-5\charscalex100 \ul0\nosupersub\cf50\f51\fs23 Year \up0 \expndtw-5\charscale
x100 \ul0\nosupersub\cf51\f52\fs23 \u-4053? \up0 \expndtw-5\charscalex100 \ul0\n
osupersub\cf49\f50\fs23 \u949? \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf4
8\f49\fs13 i,t \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf19\f20\fs24 (Mode
l 5) \par\pard\sect\sectd\sbknone \ql \li8750\sb40\sl-149\slmult0 \up0 \expndtw1\charscalex100 \ul0\nosupersub\cf48\f49\fs13 t\par\pard\sect\sectd\sbknone\cols
4\colno1\colw4014\colsr20\colno2\colw3993\colsr20\colno3\colw1775\colsr160\colno
4\colw2138\colsr160\ql \li1751\sb60\sl-241\slmult0\tx2817 \up0 \expndtw-2\charsc
alex100 \ul0\nosupersub\cf56\f57\fs21 Investment \up0 \expndtw-8\charscalex72 \u
l0\nosupersub\cf54\f55\fs12 i, t\tab \up0 \expndtw-2\charscalex100 \ul0\nosupers
ub\cf57\f58\fs21 \u-4035? \up0 \expndtw-7\charscalex100 \ul0\nosupersub\cf55\f56
\fs21 \u945?\ul0\nosupersub\cf54\f55\fs12 0 \up0 \expndtw-2\charscalex100 \ul0\n
f55\f56\fs21 \u946?\ul0\nosupersub\cf54\f55\fs12 1 \up0 \expndtw-3\charscalex100
\ul0\nosupersub\cf56\f57\fs21 MIS \up0 \expndtw-8\charscalex70 \ul0\nosupersub\
cf54\f55\fs12 i, t\par\pard\ql \li1744\sb228\sl-241\slmult0\tx2800 \up0 \expndtw
-3\charscalex100 \ul0\nosupersub\cf57\f58\fs21 \u-4053? \up0 \expndtw-9\charscal
ex93 \ul0\nosupersub\cf55\f56\fs21 \u946? \up0 \expndtw-2\charscalex100 \ul0\nos
upersub\cf56\f57\fs21 Cash\tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf5
7\f58\fs21 \u-4053? \up0 \expndtw-9\charscalex93 \ul0\nosupersub\cf55\f56\fs21 \
u946? \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf56\f57\fs21 Sales \up0 \ex
pndtw-3\charscalex100 \ul0\nosupersub\cf57\f58\fs21 \u-4053? \up0 \expndtw-3\cha
rscalex100 \ul0\nosupersub\cf55\f56\fs21 \u949?\par\pard\column \ql \li20\sb150\
sl-195\slmult0\tx1035 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf58\f59\fs1
2 \u-4051?\ul0\nosupersub\cf54\f55\fs12 1 \up0 \expndtw-2\charscalex100 \ul0\nos
upersub\cf57\f58\fs21 \u-4053? \up0 \expndtw-8\charscalex93 \ul0\nosupersub\cf55
\f56\fs21 \u946? \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf54\f55\fs12 2 \
up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf56\f57\fs21 KP \up0 \expndtw-8\ch
arscalex77 \ul0\nosupersub\cf54\f55\fs12 I, T\tab \up0 \expndtw-2\charscalex100
\ul0\nosupersub\cf57\f58\fs21 \u-4053? \up0 \expndtw-8\charscalex93 \ul0\nosuper
sub\cf55\f56\fs21 \u946? \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf54\f55\
fs12 3 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf56\f57\fs21 MIS \up0 \exp
ndtw-2\charscalex100 * \up0 \expndtw-2\charscalex100 FC \up0 \expndtw-8\charscal
ex72 \ul0\nosupersub\cf54\f55\fs12 i, t \up0 \expndtw-2\charscalex100 \ul0\nosup
ersub\cf57\f58\fs21 \u-4053? \up0 \expndtw-8\charscalex93 \ul0\nosupersub\cf55\f
56\fs21 \u946? \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf54\f55\fs12 4 \up
0 \expndtw-2\charscalex100 \ul0\nosupersub\cf56\f57\fs21 Cashflow \up0 \expndtw2\charscalex100 \ul0\nosupersub\cf54\f55\fs12 i,t \up0 \expndtw-2\charscalex100
\ul0\nosupersub\cf57\f58\fs21 \u-4053? \up0 \expndtw-8\charscalex93 \ul0\nosuper
sub\cf55\f56\fs21 \u946? \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf54\f55\
fs12 5\par\pard\column \ql \li20\sb13\sl-356\slmult0 \up0 \expndtw-2\charscalex1
00 \ul0\nosupersub\cf59\f60\fs31 \u8721? \up0 \expndtw-2\charscalex100 \ul0\nosu
persub\cf56\f57\fs21 Year \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf57\f58
?\ul0\nosupersub\cf54\f55\fs12 6 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\c
f56\f57\fs21 Lev \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf54\f55\fs12 i,t
\up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf58\f59\fs12 \u-4051?\ul0\nosupe
rsub\cf54\f55\fs12 1\par\pard\ql \li109\sb1\sl-110\slmult0 \up0 \expndtw-1\chars
calex100 t\par\pard\column \ql \li20\sb208\sl-276\slmult0 \up0 \expndtw-2\charsc

alex100 \ul0\nosupersub\cf19\f20\fs24 (Model 6)\par\pard\sect\sectd\sbknone\cols
3\colno1\colw3166\colsr40\colno2\colw2135\colsr40\colno3\colw6729\colsr160\ql \l
i2018\sb0\sl-108\slmult0\tx2507\tx3081 \up0 \expndtw-1\charscalex100 \ul0\nosupe
rsub\cf54\f55\fs12 7\tab \up0 \expndtw-1\charscalex100 i,t \up0 \expndtw-1\chars
calex100 \ul0\nosupersub\cf58\f59\fs12 \u-4051?\ul0\nosupersub\cf54\f55\fs12 1\t
ab \up0 \expndtw-1\charscalex100 8\par\pard\ql \li993\sb224\sl-276\slmult0 \up0
\expndtw-5\charscalex100 \ul0\nosupersub\cf4\f5\fs24 Model to Test the H3\par\pa
rd\ql \li1763\sb19\sl-264\slmult0\tx2445\tx2992 \up0 \expndtw-3\charscalex100 \u
l0\nosupersub\cf61\f62\fs23 D \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf63
\f64\fs23 / \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf61\f62\fs23 E\tab \u
p0 \expndtw-3\charscalex100 \ul0\nosupersub\cf65\f66\fs23 \u-4035? \up0 \expndtw
-3\charscalex100 \ul0\nosupersub\cf64\f65\fs23 \u-3999? \tab \up0 \expndtw-3\cha
rscalex100 \ul0\nosupersub\cf65\f66\fs23 \u-4053?\par\pard\column \ql \li706\sb0
\sl-108\slmult0 \up0 \expndtw-1\charscalex100 \ul0\nosupersub\cf54\f55\fs12 i,t\
par\pard\ql \li2301\sb0\sl-264\slmult0 \par\pard\ql \li20\sb255\sl-264\slmult0\t
x270\tx968\tx1484\tx1960 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf64\f65\
fs23 \u-3998? \tab \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf61\f62\fs23 M
IS\tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf65\f66\fs23 \u-4053? \up0
\expndtw-3\charscalex100 \ul0\nosupersub\cf61\f62\fs23 M\tab \up0 \expndtw-3\ch
arscalex100 \ul0\nosupersub\cf63\f64\fs23 / \up0 \expndtw-3\charscalex100 \ul0\n
osupersub\cf61\f62\fs23 B \tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf6
5\f66\fs23 \u-4053?\par\pard\column \ql \li2301\sb0\sl-264\slmult0 \par\pard\ql
\li2301\sb0\sl-264\slmult0 \par\pard\ql \li20\sb98\sl-264\slmult0\tx740\tx1621\t
x4616 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf61\f62\fs23 TAR\tab \up0 \
expndtw-3\charscalex100 \ul0\nosupersub\cf65\f66\fs23 \u-4053? \up0 \expndtw-2\c
harscalex100 \ul0\nosupersub\cf61\f62\fs23 Size\tab \up0 \expndtw-3\charscalex10
0 \ul0\nosupersub\cf65\f66\fs23 \u-4053? \up0 \expndtw-3\charscalex100 \ul0\nosu
persub\cf64\f65\fs23 \u-3995? \tab \up0 \expndtw-2\charscalex100 \ul0\nosupersub
\cf19\f20\fs24 (Model 7) \par\pard\sect\sectd\sbknone \li2301\sb0\sl-117\slmult0
\fi0\tx2839\tx3359\tx3919\tx3976\tx4955\tx5855\tx6736\tx7305 \up0 \expndtw0\char
scalex110 \ul0\nosupersub\cf60\f61\fs13 t\tab \up0 \expndtw0\charscalex110 \ul0\
nosupersub\cf62\f63\fs13 0\tab \up0 \expndtw0\charscalex110 1\tab \up0 \expndtw3\charscalex100 \ul0\nosupersub\cf60\f61\fs13 i\tab \up0 \expndtw0\charscalex110
\ul0\nosupersub\cf62\f63\fs13 ,\ul0\nosupersub\cf60\f61\fs13 t\tab \up0 \expndt
w-3\charscalex100 i\t \up0 \expndtw0\charscalex110 \ul0\nosupersub\cf62\f63\fs13
,\ul0\nosupersub\cf60\f61\fs13 t\tab \up0 \expndtw0\charscalex110 i \ul0\nosupe
rsub\cf62\f63\fs13 ,\ul0\nosupersub\cf60\f61\fs13 t\tab \up0 \expndtw0\charscale
x110 i\ul0\nosupersub\cf62\f63\fs13 ,\ul0\nosupersub\cf60\f61\fs13 t\tab \up0 \e
xpndtw0\charscalex110 i\ul0\nosupersub\cf62\f63\fs13 ,\ul0\nosupersub\cf60\f61\f
s13 t\par\pard\ql \li993\sb0\sl-322\slmult0 \par\pard\ql\li993\sb186\sl-322\slmu
lt0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf6\f7\fs28 5. The Result of
Hypotheses Testing \par\pard\ql \li993\sb1\sl-271\slmult0 \up0 \expndtw-5\charsc
alex100 \ul0\nosupersub\cf4\f5\fs24 5.1. Prediction Model of Market-to-Book Valu
e \par\pard\qj \li993\ri1105\sb150\sl-270\slmult0\fi0 \up0 \expndtw0\charscalex1
00 \ul0\nosupersub\cf19\f20\fs24 Regression of prediction model shows the value
of coefficient of determination is quite high which \up0 \expndtw-3\charscalex10
0 reached 62.8% (see table 1), but there is one variables that is not significan
t (DPR), then excluded from \up0 \expndtw-4\charscalex100 the prediction model.
bxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz37\shplid0{\sp{\sn shapeType}{\s
v 20}}{\sp{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}}{\sp{\sn lineW
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bxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz106\shplid1{\sp{\sn shapeType}{\
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-3\charscalex100 \ul0\nosupersub\cf32\f33\fs24 Middle Eastern Finance and Econom

ics - Issue 9 (2011)\tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf19\f20\
fs24 19\par\pard\li1295\sb215\sl-253\slmult0\fi0 \up0 \expndtw-2\charscalex100 \
ul0\nosupersub\cf66\f67\fs22 Table 1:\ul0\nosupersub\cf67\f68\fs22
Regressio
n of Prediction Model of Market to Book Value\par\pard\li1295\sb0\sl-230\slmult0
\par\pard\li1295\sb62\sl-230\slmult0\fi108\tx3770\tx5983\tx7912\tx9535 \up0 \exp
ndtw-2\charscalex100 \ul0\nosupersub\cf68\f69\fs20 Variabels\tab \up0 \expndtw-2
\charscalex100 Coefficient\tab \up0 \expndtw-2\charscalex100 t value\tab \up0 \e
xpndtw-2\charscalex100 Constant\tab \up0 \expndtw-2\charscalex100 Adjusted R squ
are\par\pard\li1295\sb5\sl-230\slmult0\fi108\tx3983\tx6016 \up0 \expndtw-2\chars
calex100 \ul0\nosupersub\cf69\f70\fs20 EPS\tab \up0 \expndtw-2\charscalex100 0\t
ab \up0 \expndtw-2\charscalex100 1.503\par\pard\li1295\sb1\sl-230\slmult0\fi108\
tx3983\tx6016 \up0 \expndtw-2\charscalex100 PER\tab \up0 \expndtw-2\charscalex10
0 0.005\tab \up0 \expndtw-2\charscalex100 2.147**\par\pard\li1295\sb0\sl-228\slm
ult0\fi108\tx3983\tx6016\tx8075\tx10235 \up0 \expndtw-2\charscalex100 ROE\tab \u
p0 \expndtw-2\charscalex100 0.005\tab \up0 \expndtw-2\charscalex100 3.798***\tab
\up0 \expndtw-2\charscalex100 0.206\tab \up0 \expndtw-2\charscalex100 28\par\pa
rd\li1295\sb1\sl-230\slmult0\fi108\tx3983\tx6016 \up0 \expndtw-2\charscalex100 R
OA\tab \up0 \expndtw-2\charscalex100 0.01\tab \up0 \expndtw-2\charscalex100 2.94
1***\par\pard\li1295\sb0\sl-230\slmult0\fi108\tx3983\tx6016 \up0 \expndtw-2\char
scalex100 DPR\tab \up0 \expndtw-2\charscalex100 0.122\tab \up0 \expndtw-2\charsc
alex100 0.597\par\pard\li1295\sb1\sl-230\slmult0\fi108\tx3983\tx6016 \up0 \expnd
tw-2\charscalex100 PTS\tab \up0 \expndtw-2\charscalex100 0.133\tab \up0 \expndtw
-2\charscalex100 2.350**\par\pard\li1295\sb0\sl-230\slmult0\fi108\tx3983\tx5915
\up0 \expndtw-2\charscalex100 PTFCF\tab \up0 \expndtw-2\charscalex100 0.11\tab \
up0 \expndtw-2\charscalex100 21.665***\par\pard\li1295\sb10\sl-230\slmult0\fi0\t
x2015 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf68\f69\fs20 Note:\tab \up0
\expndtw-1\charscalex100 \ul0\nosupersub\cf69\f70\fs20 ***: Significant at 1%
, **: Significant at 5%, *: Significant at 10%\par\pard\ql \li2015\sb259\sl-27
6\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf19\f20\fs24 Based on t
he regression results, the prediction model of market-to-book value is as follow
s: \par\pard\ql \li2015\sb4\sl-276\slmult0 \up0 \expndtw-3\charscalex100 M/Bpre
= 0,206 + 0,005PER + 0,005ROE + 0,010ROA + 0,133PTS + 0,110PTFCF \par\pard\qj \l
i1296\ri804\sb1\sl-280\slmult0\fi719 \up0 \expndtw-1\charscalex100 Then, reducti
on of the actual value to the prediction model find that 311 observations (62.8%
) \up0 \expndtw-2\charscalex100 are overvalued stock and 184 observations (37.2%
) are undervalued. \par\pard\ql \li1295\sb0\sl-276\slmult0 \par\pard\ql\li1295\s
b8\sl-276\slmult0 \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf4\f5\fs24 5.2.
The Result of Testing H1 \par\pard\ql \li1295\sb0\sl-253\slmult0 \par\pard\ql\l
i1295\sb150\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf66\f6
7\fs22 Table 2:\ul0\nosupersub\cf67\f68\fs22
Test of the Effect of Mispricin
g on Investment\par\pard\sect\sectd\sbknone\cols4\colno1\colw2909\colsr160\colno
2\colw1513\colsr160\colno3\colw3340\colsr160\colno4\colw3878\colsr160\ql \li1403
\sb0\sl-230\slmult0 \par\pard\ql \li1403\sb182\sl-230\slmult0 \up0 \expndtw-2\ch
arscalex100 \ul0\nosupersub\cf68\f69\fs20 Model\par\pard\ql \li1403\sb0\sl-230\s
lmult0 \par\pard\ql \li1403\sb0\sl-230\slmult0 \par\pard\ql \li1403\sb11\sl-230\
slmult0 \up0 \expndtw-2\charscalex100 Main Model\par\pard\ql \li1403\sb0\sl-230\
slmult0 \par\pard\ql \li1403\sb0\sl-230\slmult0 \par\pard\ql \li1403\sb0\sl-230\
slmult0 \par\pard\ql \li1403\sb0\sl-230\slmult0 \par\pard\ql \li1403\sb124\sl-23
0\slmult0 \up0 \expndtw-2\charscalex100 Robustness test\par\pard\column \ql \li3
069\sb0\sl-230\slmult0 \par\pard\ql \li20\sb67\sl-230\slmult0 \up0 \expndtw-2\ch
arscalex100 Dependent\par\pard\ql \li20\sb0\sl-230\slmult0 \up0 \expndtw-2\chars
calex100 Variables\par\pard\ql \li3069\sb0\sl-230\slmult0 \par\pard\ql \li20\sb1
21\sl-230\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf69\f70\fs20 In
vestment (INV)\par\pard\ql \li3069\sb0\sl-230\slmult0 \par\pard\ql \li3069\sb0\s
l-230\slmult0 \par\pard\ql \li3069\sb0\sl-230\slmult0 \par\pard\ql \li3069\sb0\s
l-230\slmult0 \par\pard\ql \li20\sb124\sl-230\slmult0 \up0 \expndtw-2\charscalex
100 Investment (INV)\par\pard\column \ql \li4732\sb0\sl-230\slmult0 \par\pard\ql
\li20\sb67\sl-230\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf68\f6
9\fs20 Independent\par\pard\ql \li1976\sb0\sl-180\slmult0 \up0 \expndtw-2\charsc
alex100 Coeficient\par\pard\ql \li20\sb0\sl-180\slmult0 \up0 \expndtw-2\charscal

ex100 Variables\par\pard\ql \li20\sb0\sl-180\slmult0\tx2178 \up0 \expndtw-2\char
scalex100 \ul0\nosupersub\cf69\f70\fs20 Constant\tab \up0 \expndtw-2\charscalex1
00 0.210\par\pard\ql \li20\sb0\sl-180\slmult0\tx2178 \up0 \expndtw-2\charscalex1
00 Mispricing\tab \up0 \expndtw-2\charscalex100 0.021\par\pard\ql \li20\sb1\sl-2
02\slmult0\tx2178 \up0 \expndtw-2\charscalex100 Cashflow\tab \up0 \expndtw-2\cha
rscalex100 0.132\par\pard\ql \li20\sb6\sl-230\slmult0\tx2178 \up0 \expndtw-2\cha
rscalex100 Year\tab \up0 \expndtw-2\charscalex100 0.003\par\pard\ql \li20\sb10\s
l-230\slmult0\tx2178 \up0 \expndtw-2\charscalex100 Constant\tab \up0 \expndtw-2\
charscalex100 0.544\par\pard\ql \li20\sb0\sl-230\slmult0\tx2178 \up0 \expndtw-2\
charscalex100 Mispricing\tab \up0 \expndtw-2\charscalex100 0.010\par\pard\ql \li
20\sb1\sl-227\slmult0\tx2178 \up0 \expndtw-2\charscalex100 Cashflow\tab \up0 \ex
pndtw-2\charscalex100 0.348\par\pard\ql \li20\sb1\sl-230\slmult0\tx2178 \up0 \ex
pndtw-2\charscalex100 Year\tab \up0 \expndtw-2\charscalex100 0.002\par\pard\ql \
li20\sb1\sl-230\slmult0\tx2113 \up0 \expndtw-2\charscalex100 Leverage\tab \up0 \
expndtw-2\charscalex100 -0.406\par\pard\ql \li20\sb0\sl-230\slmult0\tx2178 \up0
\expndtw-2\charscalex100 Cash\tab \up0 \expndtw-2\charscalex100 0.450\par\pard\q
l \li20\sb1\sl-230\slmult0\tx2113 \up0 \expndtw-2\charscalex100 Sales\tab \up0 \
expndtw-2\charscalex100 -0.304\par\pard\column \ql \li8503\sb0\sl-230\slmult0 \p
ar\pard\ql \li1767\sb67\sl-230\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupe
rsub\cf68\f69\fs20 Adjusted R\par\pard\ql \li301\sb0\sl-180\slmult0 \up0 \expndt
w-2\charscalex100 t value\par\pard\ql \li1961\sb0\sl-180\slmult0 \up0 \expndtw-2
\charscalex100 square\par\pard\ql \li185\sb0\sl-180\slmult0 \up0 \expndtw-2\char
scalex100 \ul0\nosupersub\cf69\f70\fs20 6.634***\par\pard\ql \li185\sb0\sl-180\s
lmult0 \up0 \expndtw-2\charscalex100 3.095***\par\pard\ql \li2026\sb0\sl-180\slm
ult0 \up0 \expndtw-2\charscalex100 0.056\par\pard\ql \li185\sb0\sl-180\slmult0 \
up0 \expndtw-2\charscalex100 2.254**\par\pard\ql \li185\sb0\sl-180\slmult0 \up0
\expndtw-2\charscalex100 3.166***\par\pard\ql \li85\sb0\sl-180\slmult0 \up0 \exp
ndtw-2\charscalex100 10.777***\par\pard\ql \li185\sb1\sl-182\slmult0 \up0 \expnd
tw-2\charscalex100 1.758*\par\pard\ql \li185\sb9\sl-227\slmult0 \up0 \expndtw-2\
charscalex100 6.285***\par\pard\ql \li185\sb1\sl-230\slmult0\tx2031 \up0 \expndt
w-2\charscalex100 2.253**\tab \up0 \expndtw-2\charscalex100 0.341\par\pard\ql \l
i20\sb1\sl-230\slmult0 \up0 \expndtw-2\charscalex100 -10.929***\par\pard\ql \li1
85\sb0\sl-230\slmult0 \up0 \expndtw-2\charscalex100 2.708***\par\pard\ql \li121\
sb1\sl-230\slmult0 \up0 \expndtw-2\charscalex100 -4.426*** \par\pard\sect\sectd\
sbknone \li1295\sb10\sl-230\slmult0\fi0\tx2015 \up0 \expndtw-3\charscalex100 \ul
0\nosupersub\cf68\f69\fs20 Note:\tab \up0 \expndtw-3\charscalex100 \ul0\nosupers
ub\cf69\f70\fs20 ***: Significant at 1%, **: Significant at 5%, *: Significa
nt at 10%\par\pard\qj \li1295\ri803\sb264\sl-276\slmult0\fi720 \up0 \expndtw0\ch
arscalex100 \ul0\nosupersub\cf19\f20\fs24 The results of testing H1 show that mi
spricing occurred in the firm\u8217?s stock price has positive \line \up0 \expnd
tw0\charscalex103 effect on the level of investment. The results in accordance w
ith previous studies (eg Chang et al, \line \up0 \expndtw0\charscalex100 2005;
Chang et al, 2007; Xiao, 2003; Baker et al, 2003; Alzahrani, 2006; Polk and Sapi
enza, 2004). \line \up0 \expndtw-1\charscalex100 This result indicates that the
value of the stock market in Indonesia provide information for managers \line \u
p0 \expndtw-2\charscalex100 relating to the firm\u8217?s investment decisions. T
his result are also consistent and can be explained by two \line \up0 \expndtw-1
\charscalex100 theories, market timing and catering hypothesis. High stock price
can be considered by managers as a \line \up0 \expndtw-1\charscalex100 sign tha
t investors have positive perception to the firm's investment decision. This res
ult also indicate \line \up0 \expndtw0\charscalex102 that overpriced stocks ten
d to increase the firm's investment opportunities. Robustness test show \line
\up0 \expndtw0\charscalex102 consistency that mispricing affects investment leve
ls but the significance level is decreased. These \line \up0 \expndtw-3\charscal
ex100 three variables, Leverage, Cash and Sales show significant effect on inves
tment and consistent with the \line \up0 \expndtw-4\charscalex100 results of pre
vious research.
}
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}

\nosupersub\cf4\f5\fs24 5.3. The Result of Testing H2\par\pard\li993\sb0\sl-253\
slmult0\par\pard\li993\sb158\sl-253\slmult0\fi0 \up0 \expndtw-2\charscalex100 \u
l0\nosupersub\cf66\f67\fs22 Table 3:\ul0\nosupersub\cf67\f68\fs22
Logit Regr
ession to Predict Financial Constraints\par\pard\li993\sb0\sl-230\slmult0\par\pa
rd\li993\sb59\sl-230\slmult0\fi107\tx4274\tx6638\tx8800 \up0 \expndtw-2\charscal
ex100 \ul0\nosupersub\cf68\f69\fs20 Variabels\tab \up0 \expndtw-2\charscalex100
Coefficient\tab \up0 \expndtw-2\charscalex100 Wald statistik\tab \up0 \expndtw-2
\charscalex100 Nagelkerke\u8217? R square\par\pard\li993\sb5\sl-230\slmult0\fi10
7\tx4430\tx6890 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf69\f70\fs20 Cons
tant\tab \up0 \expndtw-2\charscalex100 -1.426\tab \up0 \expndtw-2\charscalex100
40.436***\par\pard\li993\sb0\sl-230\slmult0\fi107\tx4430\tx6991 \up0 \expndtw-2\
charscalex100 CR\tab \up0 \expndtw-2\charscalex100 -0.064\tab \up0 \expndtw-2\ch
arscalex100 1.564\par\pard\li993\sb1\sl-230\slmult0\fi107\tx4495\tx6890\tx9508 \
up0 \expndtw-2\charscalex100 PROFIT\tab \up0 \expndtw-2\charscalex100 3.666\tab
\up0 \expndtw-2\charscalex100 11.562***\tab \up0 \expndtw-2\charscalex100 0.234\
par\pard\li993\sb0\sl-230\slmult0\fi107\tx4430\tx6991 \up0 \expndtw-2\charscalex
100 CP\tab \up0 \expndtw-2\charscalex100 -0.133\tab \up0 \expndtw-2\charscalex10
0 0.416\par\pard\li993\sb0\sl-228\slmult0\fi107\tx4495\tx6890 \up0 \expndtw-2\ch
arscalex100 RE\tab \up0 \expndtw-2\charscalex100 1.526\tab \up0 \expndtw-2\chars
calex100 24.389***\par\pard\li993\sb2\sl-230\slmult0\fi107\tx4495\tx6991 \up0 \e
xpndtw-2\charscalex100 SLACK\tab \up0 \expndtw-2\charscalex100 1.084\tab \up0 \e
xpndtw-2\charscalex100 3.834**\par\pard\li993\sb10\sl-230\slmult0\fi0\tx1713 \up
0 \expndtw-2\charscalex100 \ul0\nosupersub\cf68\f69\fs20 Note:\tab \up0 \expndtw
-2\charscalex100 \ul0\nosupersub\cf69\f70\fs20 ***: Significant at 1%, **: S
ignificant at 5%, *: Significant 10%\par\pard\li993\sb274\sl-276\slmult0\fi719 \
up0 \expndtw0\charscalex100 \ul0\nosupersub\cf19\f20\fs24 Based on logit regress
ion model there are two variables that are not significant (CR and CP),\par\pard
\li993\sb0\sl-276\slmult0\fi0 \up0 \expndtw0\charscalex100 then excluded from th
e prediction model. The predicted model of financial constraints are:\par\pard\s
ect\sectd\sbknone\cols3\colno1\colw2395\colsr40\colno2\colw2107\colsr40\colno3\c
olw7528\colsr160\ql \li1759\sb228\sl-276\slmult0\tx2177 \up0 \expndtw-3\charscal
ex100 \ul0\nosupersub\cf71\f72\fs24 FC \tab \up0 \expndtw-3\charscalex100 \ul0\n
osupersub\cf74\f75\fs24 \u-4035?\par\pard\column \ql \li285\sb58\sl-276\slmult0\
tx597\tx990 \up0 \expndtw0\charscalex80 \ul0\nosupersub\cf75\f76\fs24 \u-1813? \
tab \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf71\f72\fs24 P \up0 \expndtw3\charscalex100 \ul0\nosupersub\cf72\f73\fs14 i\tab \up0 \expndtw0\charscalex80
\ul0\nosupersub\cf75\f76\fs24 \u-1802?\par\pard\ql \li20\sb0\sl-216\slmult0\tx11
51 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf71\f72\fs24 Ln\tab \up0 \expn
dtw-3\charscalex100 \ul0\nosupersub\cf74\f75\fs24 \u-4035? \up0 \expndtw-3\chars
calex100 \u-4051? \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf75\f76\fs24 1,
426\par\pard\column \ql \li20\sb228\sl-276\slmult0 \up0 \expndtw-3\charscalex100
\ul0\nosupersub\cf74\f75\fs24 \u-4053? \up0 \expndtw-3\charscalex100 \ul0\nosup
ersub\cf75\f76\fs24 3,666 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf71\f72
\fs24 PROFIT \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf74\f75\fs24 \u-4053
? \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf73\f74\fs24 1,084 \up0 \expndt
w-3\charscalex100 \ul0\nosupersub\cf71\f72\fs24 SLACK \up0 \expndtw-3\charscalex
100 \ul0\nosupersub\cf74\f75\fs24 \u-4053? \up0 \expndtw-2\charscalex100 \ul0\no
supersub\cf73\f74\fs24 1,526 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf71\
f72\fs24 RE\par\pard\sect\sectd\sbknone\cols2\colno1\colw3360\colsr40\colno2\col
w8700\colsr160\ql \li2083\sb0\sl-162\slmult0\tx2695 \up0 \expndtw-2\charscalex10
0 \ul0\nosupersub\cf72\f73\fs14 i\tab \up0 \expndtw0\charscalex80 \ul0\nosupersu
b\cf75\f76\fs24 \u-1812?\par\pard\ql \li2700\sb0\sl-198\slmult0 \up0 \expndtw0\c
harscalex80 \u-1811? \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf73\f74\fs24
1 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf74\f75\fs24 \u-4051? \up0 \ex
pndtw-3\charscalex100 \ul0\nosupersub\cf71\f72\fs24 P \up0 \expndtw-3\charscalex
100 \ul0\nosupersub\cf72\f73\fs14 i\par\pard\column \qj \li20\ri8508\sb0\sl-216\
slmult0 \up0 \expndtw0\charscalex80 \ul0\nosupersub\cf75\f76\fs24 \u-1801? \line
\up0 \expndtw0\charscalex80 \u-1800? \par\pard\sect\sectd\sbknone \ql \li1713\s
b0\sl-216\slmult0 \up0 \expndtw-1\charscalex100 \ul0\nosupersub\cf19\f20\fs24 To

ensure that the model has the ability to predict precisely, We use
cross classification \par\pard\ql \li993\sb0\sl-216\slmult0 \up0 \expndtw0\char
scalex100 between actual and predicted observation. This method indicates
that the prediction model has \par\pard\ql \li993\sb3\sl-216\slmult0 \up0
\expndtw-2\charscalex100 predictive ability of 73.3 percent. \par\pard\ql \li993
\sb0\sl-253\slmult0 \par\pard\ql\li993\sb1\sl-253\slmult0 \up0 \expndtw-1\charsc
alex100 \ul0\nosupersub\cf66\f67\fs22 Table 4:\ul0\nosupersub\cf67\f68\fs22
Test of the Effect of Mispricing on Investment Based on Financial Constraints\pa
r\pard\sect\sectd\sbknone\cols4\colno1\colw2607\colsr160\colno2\colw1515\colsr16
0\colno3\colw3409\colsr160\colno4\colw4109\colsr160\ql \li1552\sb0\sl-230\slmult
0 \par\pard\ql \li1552\sb192\sl-230\slmult0 \up0 \expndtw-2\charscalex100 \ul0\n
osupersub\cf68\f69\fs20 Model\par\pard\ql \li1101\sb0\sl-230\slmult0 \par\pard\q
l \li1101\sb0\sl-230\slmult0 \par\pard\ql \li1101\sb0\sl-230\slmult0 \par\pard\q
l \li1101\sb8\sl-230\slmult0 \up0 \expndtw-2\charscalex100 Main Model\par\pard\q
l \li1101\sb126\sl-230\slmult0 \up0 \expndtw-2\charscalex100 Robustness test\par
\pard\column \ql \li3031\sb0\sl-230\slmult0 \par\pard\ql \li284\sb76\sl-230\slmu
lt0 \up0 \expndtw-2\charscalex100 Dependent\par\pard\ql \li332\sb1\sl-230\slmult
0 \up0 \expndtw-2\charscalex100 Variables\par\pard\ql \li2767\sb0\sl-230\slmult0
\par\pard\ql \li2767\sb0\sl-230\slmult0 \par\pard\ql \li20\sb119\sl-230\slmult0
\up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf69\f70\fs20 Investment (INV)\pa
r\pard\ql \li2767\sb0\sl-230\slmult0 \par\pard\ql \li2767\sb0\sl-230\slmult0 \pa
r\pard\ql \li20\sb125\sl-230\slmult0 \up0 \expndtw-2\charscalex100 Investment (I
NV)\par\pard\column \ql \li4432\sb0\sl-230\slmult0 \par\pard\ql \li20\sb76\sl-23
0\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf68\f69\fs20 Independen
t\par\pard\ql \li1974\sb0\sl-180\slmult0 \up0 \expndtw-2\charscalex100 Coeficien
t\par\pard\ql \li20\sb0\sl-180\slmult0 \up0 \expndtw-2\charscalex100 Variables\p
ar\pard\ql \li20\sb0\sl-180\slmult0\tx2154 \up0 \expndtw-2\charscalex100 \ul0\no
supersub\cf69\f70\fs20 Constant\tab \up0 \expndtw-2\charscalex100 0.119\par\pard
\ql \li20\sb0\sl-180\slmult0\tx2154 \up0 \expndtw-2\charscalex100 Mispricing\tab
\up0 \expndtw-2\charscalex100 0.036\par\pard\ql \li20\sb1\sl-200\slmult0\tx2154
\up0 \expndtw-2\charscalex100 Cashflow\tab \up0 \expndtw-2\charscalex100 0.143\
par\pard\ql \li20\sb7\sl-230\slmult0\tx2154 \up0 \expndtw-2\charscalex100 Year\t
ab \up0 \expndtw-2\charscalex100 0.001\par\pard\ql \li20\sb0\sl-230\slmult0\tx21
54 \up0 \expndtw-3\charscalex100 FC\tab \up0 \expndtw-2\charscalex100 0.257\par\
pard\ql \li20\sb1\sl-230\slmult0\tx2089 \up0 \expndtw-2\charscalex100 FC*MIS\tab
\up0 \expndtw-2\charscalex100 -0.029\par\pard\ql \li20\sb10\sl-230\slmult0\tx21
54 \up0 \expndtw-2\charscalex100 Constant\tab \up0 \expndtw-2\charscalex100 0.49
4\par\pard\ql \li20\sb0\sl-230\slmult0\tx2154 \up0 \expndtw-2\charscalex100 Misp
ricing\tab \up0 \expndtw-2\charscalex100 0.031\par\pard\ql \li20\sb0\sl-230\slmu
lt0\tx2154 \up0 \expndtw-2\charscalex100 Cashflow\tab \up0 \expndtw-2\charscalex
100 0.124\par\pard\ql \li20\sb1\sl-227\slmult0\tx2154 \up0 \expndtw-2\charscalex
100 Year\tab \up0 \expndtw-2\charscalex100 0.001\par\pard\ql \li20\sb2\sl-230\sl
mult0\tx2089 \up0 \expndtw-2\charscalex100 Leverage\tab \up0 \expndtw-2\charscal
ex100 -0.328\par\pard\ql \li20\sb0\sl-230\slmult0\tx2154 \up0 \expndtw-2\charsca
lex100 Cash\tab \up0 \expndtw-2\charscalex100 0.164\par\pard\ql \li20\sb1\sl-230
\slmult0\tx2089 \up0 \expndtw-2\charscalex100 Sales\tab \up0 \expndtw-2\charscal
ex100 -0.327\par\pard\ql \li20\sb0\sl-230\slmult0\tx2154 \up0 \expndtw-3\charsca
lex100 FC\tab \up0 \expndtw-2\charscalex100 0.125\par\pard\ql \li20\sb0\sl-228\s
lmult0\tx2089 \up0 \expndtw-2\charscalex100 FC*MIS\tab \up0 \expndtw-2\charscale
x100 -0.022\par\pard\column \ql \li8200\sb0\sl-230\slmult0 \par\pard\ql \li1696\
sb76\sl-230\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf68\f69\fs20
Adjusted R\par\pard\ql \li229\sb0\sl-180\slmult0 \up0 \expndtw-2\charscalex100 t
value\par\pard\ql \li1890\sb0\sl-180\slmult0 \up0 \expndtw-2\charscalex100 squa
re\par\pard\ql \li121\sb0\sl-180\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosu
persub\cf69\f70\fs20 4.421***\par\pard\ql \li121\sb0\sl-180\slmult0 \up0 \expndt

w-2\charscalex100 3.462***\par\pard\ql \li121\sb1\sl-200\slmult0 \up0 \expndtw-2
\charscalex100 1.759*\par\pard\ql \li2005\sb0\sl-180\slmult0 \up0 \expndtw-2\cha
rscalex100 0.23\par\pard\ql \li121\sb0\sl-180\slmult0 \up0 \expndtw-2\charscalex
100 1.120\par\pard\ql \li121\sb0\sl-180\slmult0 \up0 \expndtw-2\charscalex100 9.
272***\par\pard\ql \li56\sb0\sl-180\slmult0 \up0 \expndtw-2\charscalex100 -1.902
*\par\pard\ql \li20\sb1\sl-216\slmult0 \up0 \expndtw-2\charscalex100 10.178***\p
ar\pard\ql \li121\sb3\sl-230\slmult0 \up0 \expndtw-2\charscalex100 3.355***\par\
pard\ql \li121\sb0\sl-230\slmult0 \up0 \expndtw-2\charscalex100 1.696*\par\pard\
ql \li121\sb1\sl-227\slmult0 \up0 \expndtw-2\charscalex100 1.335\par\pard\ql \li
56\sb2\sl-230\slmult0\tx1960 \up0 \expndtw-2\charscalex100 -8.174***\tab \up0 \e
xpndtw-2\charscalex100 0.389\par\pard\ql \li121\sb0\sl-230\slmult0 \up0 \expndtw
-2\charscalex100 1.242\par\pard\ql \li56\sb1\sl-230\slmult0 \up0 \expndtw-2\char
scalex100 -5.868***\par\pard\ql \li121\sb0\sl-230\slmult0 \up0 \expndtw-2\charsc
alex100 4.535***\par\pard\ql \li56\sb0\sl-228\slmult0 \up0 \expndtw-2\charscalex
100 -1.630 \par\pard\sect\sectd\sbknone \ql \li993\sb1\sl-225\slmult0 \up0 \expn
dtw-3\charscalex100 \ul0\nosupersub\cf68\f69\fs20 Note: \ul0\nosupersub\cf69\f70
\fs20 ***: Significant at 1%, **: Significant at 5%, *: Significant at 10% \
par\pard\qj \li993\ri1105\sb273\sl-277\slmult0\fi719 \up0 \expndtw0\charscalex10
0 \ul0\nosupersub\cf19\f20\fs24 The results of testing H2 indicate that the degr
ee of financial constraint only slightly affect the \line \up0 \expndtw0\charsca
lex103 degree of the effect of mispricing on investment (see t value of FC*MIS i
n table 4). These findings \line \up0 \expndtw0\charscalex103 somewhat different
with the theory and previous research results (Stein, 1996; Baker et al., 20
03; \line \up0 \expndtw0\charscalex105 Shleifer and Vishny, 2003; Chang et al.,
2005; Chang et al., 2007). The low difference based on \line \up0 \expndtw0\c
harscalex100 financial constraint shows that whatever the level of their financi
al constraints, the two groups of firms \line \up0 \expndtw0\charscalex100 will
react nearly equal to the changes in market prices. The similar response in both
LFC and HFC can \line \up0 \expndtw0\charscalex100 be explained by the theory o
f Catering hypothesis which states that one reason why managers respond \line \u
p0 \expndtw-1\charscalex100 to the stock market because the stock can affect the
"reputation" and their compensation.
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{\shp {\*\shpinst\shpleft9324\shptop11224\shpright10979\shpbottom11244\shpfhdr0\
shpbxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz843\shplid231
}
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-2\charscalex100 \ul0\nosupersub\cf32\f33\fs24 Middle Eastern Finance and Econom
ics - Issue 9 (2011)\tab \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf19\f20\
fs24 21\par\pard\li1295\sb220\sl-276\slmult0\fi0 \up0 \expndtw-2\charscalex100 \
ul0\nosupersub\cf4\f5\fs24 5.4. The Result of Testing H3\par\pard\li1295\sb0\sl276\slmult0\par\pard\li1295\sb132\sl-276\slmult0\fi0 \up0 \expndtw-2\charscalex1
00 \ul0\nosupersub\cf66\f67\fs22 Table 5:\ul0\nosupersub\cf67\f68\fs22 \ul0\nos
upersub\cf19\f20\fs24
Test of the effect of mispricing on capital structure\p
ar\pard\li1403\sb0\sl-230\slmult0\par\pard\li1403\sb63\sl-230\slmult0\fi1665\tx4
732\tx9969 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf68\f69\fs20 Dependent
\tab \up0 \expndtw-2\charscalex100 Independent\tab \up0 \expndtw-2\charscalex100
Adjusted R\par\pard\sect\sectd\sbknone\cols4\colno1\colw2909\colsr160\colno2\co
lw1513\colsr160\colno3\colw3539\colsr160\colno4\colw3679\colsr160\ql \li1403\sb0
\sl-180\slmult0 \up0 \expndtw-2\charscalex100 Model\par\pard\ql \li1403\sb0\sl-2
30\slmult0 \par\pard\ql \li1403\sb0\sl-230\slmult0 \par\pard\ql \li1403\sb55\sl230\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf69\f70\fs20 Without
Dummy\par\pard\ql \li1403\sb0\sl-230\slmult0 \par\pard\ql \li1403\sb0\sl-230\slm
ult0 \par\pard\ql \li1403\sb0\sl-230\slmult0 \par\pard\ql \li1403\sb126\sl-230\s
lmult0 \up0 \expndtw-2\charscalex100 With Dummy\par\pard\ql \li1403\sb1\sl-227\s
lmult0 \up0 \expndtw-2\charscalex100 (FC ; LFC: 1,\par\pard\ql \li1403\sb2\sl-23
0\slmult0 \up0 \expndtw-8\charscalex100 HFC: 0)\par\pard\column \ql \li20\sb0\
sl-230\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf68\f69\fs20 Varia
bles\par\pard\ql \li3069\sb0\sl-230\slmult0 \par\pard\ql \li3069\sb0\sl-230\slmu
lt0 \par\pard\ql \li20\sb4\sl-230\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nos
upersub\cf69\f70\fs20 D/E\par\pard\ql \li3069\sb0\sl-230\slmult0 \par\pard\ql \l
i3069\sb0\sl-230\slmult0 \par\pard\ql \li3069\sb0\sl-230\slmult0 \par\pard\ql \l
i3069\sb0\sl-230\slmult0 \par\pard\ql \li20\sb124\sl-230\slmult0 \up0 \expndtw-2
\charscalex100 D/E\par\pard\column \ql \li1976\sb0\sl-180\slmult0 \up0 \expndtw2\charscalex100 \ul0\nosupersub\cf68\f69\fs20 Coeficient\par\pard\ql \li20\sb0\s
l-180\slmult0 \up0 \expndtw-2\charscalex100 Variables\par\pard\ql \li20\sb0\sl-1
80\slmult0\tx2092 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf69\f70\fs20 Co
nstant\tab \up0 \expndtw-2\charscalex100 -4.306\par\pard\ql \li20\sb0\sl-180\slm
ult0\tx2156 \up0 \expndtw-2\charscalex100 M/B\tab \up0 \expndtw-2\charscalex100
0.057\par\pard\ql \li20\sb1\sl-200\slmult0\tx2156 \up0 \expndtw-2\charscalex100
Size\tab \up0 \expndtw-2\charscalex100 0.270\par\pard\ql \li20\sb6\sl-230\slmult

0\tx2156 \up0 \expndtw-2\charscalex100 TAR\tab \up0 \expndtw-2\charscalex100 0.1
18\par\pard\ql \li20\sb1\sl-230\slmult0\tx2092 \up0 \expndtw-2\charscalex100 MIS
PRICING\tab \up0 \expndtw-2\charscalex100 -0.066\par\pard\ql \li20\sb10\sl-230\s
lmult0\tx2092 \up0 \expndtw-2\charscalex100 Constant\tab \up0 \expndtw-2\charsca
lex100 -4.622\par\pard\ql \li20\sb0\sl-230\slmult0\tx2156 \up0 \expndtw-2\charsc
alex100 M/B\tab \up0 \expndtw-2\charscalex100 0.057\par\pard\ql \li20\sb0\sl-230
\slmult0\tx2156 \up0 \expndtw-2\charscalex100 Size\tab \up0 \expndtw-2\charscale
x100 0.319\par\pard\ql \li20\sb0\sl-228\slmult0\tx2092 \up0 \expndtw-2\charscale
x100 TAR\tab \up0 \expndtw-2\charscalex100 -0.498\par\pard\ql \li20\sb2\sl-230\s
lmult0\tx2092 \up0 \expndtw-2\charscalex100 MISPRICING\tab \up0 \expndtw-2\chars
calex100 -0.066\par\pard\ql \li20\sb0\sl-230\slmult0\tx2092 \up0 \expndtw-3\char
scalex100 FC\tab \up0 \expndtw-2\charscalex100 -0.578\par\pard\column \ql \li102
\sb0\sl-180\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf68\f69\fs20
t value\par\pard\ql \li1762\sb0\sl-180\slmult0 \up0 \expndtw-2\charscalex100 squ
are\par\pard\ql \li20\sb0\sl-180\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosu
persub\cf69\f70\fs20 -3.950***\par\pard\ql \li85\sb0\sl-180\slmult0 \up0 \expndt
w-2\charscalex100 2.478**\par\pard\ql \li85\sb1\sl-200\slmult0\tx1832 \up0 \expn
dtw-2\charscalex100 4.948***\tab \up0 \expndtw-2\charscalex100 0.071\par\pard\ql
\li85\sb6\sl-230\slmult0 \up0 \expndtw-2\charscalex100 0.301\par\pard\ql \li20\
sb1\sl-230\slmult0 \up0 \expndtw-2\charscalex100 -2.512**\par\pard\ql \li20\sb10
\sl-230\slmult0 \up0 \expndtw-2\charscalex100 -4.267***\par\pard\ql \li85\sb0\sl
-230\slmult0 \up0 \expndtw-2\charscalex100 2.499**\par\pard\ql \li85\sb0\sl-230\
slmult0 \up0 \expndtw-2\charscalex100 5.683***\par\pard\ql \li1878\sb0\sl-180\sl
mult0 \up0 \expndtw-2\charscalex100 0.09\par\pard\ql \li20\sb0\sl-180\slmult0 \u
p0 \expndtw-2\charscalex100 -1.149\par\pard\ql \li20\sb0\sl-180\slmult0 \up0 \ex
pndtw-2\charscalex100 -2.529**\par\pard\ql \li20\sb0\sl-180\slmult0 \up0 \expndt
w-2\charscalex100 -3.197*** \par\pard\sect\sectd\sbknone \ql \li1295\sb11\sl-188
\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf68\f69\fs20 Note: \ul0\
nosupersub\cf69\f70\fs20 ***: Significant at 1%, **: Significant at 5%, *: S
ignificant at 10% \par\pard\qj \li1295\ri804\sb277\sl-280\slmult0\fi719 \up0 \ex
pndtw0\charscalex100 \ul0\nosupersub\cf19\f20\fs24 The results of testing H3
show that mispricing significantly decrease the leverage level \line \u
p0 \expndtw0\charscalex100 reflected by debt to equity ratio \up0 \expndtw0\
charscalex100 (see table \up0 \expndtw-2\charscalex100 5). This is consisten
t with the theory \up0 \expndtw0\charscalex100 (Tobin, 1969; \par\pard\qj \l
i1295\ri803\sb5\sl-275\slmult0 \up0 \expndtw0\charscalex100 Furstenberg, 1977;
Chirinko and Schaller, 2007) and previous research (Hovakimian et, al., 2001)
. \up0 \expndtw0\charscalex100 According to Hovakimian et al. (2001), in a
ddition to the reasons for investment financing, the \up0 \expndtw0\chars
calex100 condition can also be used by overvalued firms to achieve the desired l
everage in a way pay off some \up0 \expndtw0\charscalex104 debts with the procee
ds from the sale of stocks. Conversely, if stocks are undervalued, it will make
\up0 \expndtw0\charscalex104 managers refrain from selling stock due to the rela
tive cost of capital becomes greater. \par\pard\ql \li1295\sb0\sl-322\slmult0 \p
ar\pard\ql\li1295\sb225\sl-322\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupe
rsub\cf6\f7\fs28 6. Summary and Concluding Remarks \par\pard\qj \li1295\ri803\s
b0\sl-275\slmult0 \up0 \expndtw0\charscalex102 \ul0\nosupersub\cf19\f20\fs24 Usi
ng different proxy from previous mispricing studies, our study finds that (1) Th
e changes in the \up0 \expndtw0\charscalex102 market value of stock positively a
ffect the level of investment. High stock price increase the firm's \up0 \expndt
w-2\charscalex100 investment opportunities, then increase the likelihood of a fi
rm to increase its investment. Conversely, \up0 \expndtw-2\charscalex100 the low
stock price tend to reduce investment. But (2), this effect is only slightly di
fferent based on the \up0 \expndtw-1\charscalex100 level of firm\u8217?s financi
al constraint. Every manager will react nearly equal to changes in market prices
\up0 \expndtw0\charscalex100 of their stocks. (3) Mispricing negatively affect
the firm's capital structure, although with a relatively \up0 \expndtw0\charscal
ex100 small portion. In addition, we suggest for further research to m
odify the financial constraint \up0 \expndtw-3\charscalex100 classification b
ecause we point out limitation of our study that the classification of financial
constraints \up0 \expndtw0\charscalex103 based on dividend policy can still be
debated because sometimes firms do not pay dividends more \up0 \expndtw-3\charsc
alex100 appropriately reflect the financial distress rather than financial const
raints.
}
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}
\nosupersub\cf6\f7\fs28 References\par\pard\li993\sb1\sl-269\slmult0\fi0\tx1713
\up0 \expndtw-1\charscalex100 \ul0\nosupersub\cf19\f20\fs24 [1]\tab \up0 \expndt
w0\charscalex100 Alzahrani, Mohammed F., 2006. \u8220?Stock Mispricing and
Corporate Investment Decisions\u8221?,\par\pard\li993\sb2\sl-276\slmult0\fi7
20 \up0 \expndtw0\charscalex100 \ul0\nosupersub\cf32\f33\fs24 Ph.D Thesis\ul0\no
supersub\cf19\f20\fs24 , Faculty of the Graduate College of the Oklahoma State U
niversity.\par\pard\li993\sb0\sl-276\slmult0\fi0\tx1713 \up0 \expndtw-1\charscal
ex100 [2]\tab \up0 \expndtw0\charscalex100 Baker, M., and Wurgler, J., 2002. \u8
220?Market Timing and Capital Structure\u8221?, \ul0\nosupersub\cf32\f33\fs24 Jo
urnal of Finance\par\pard\li993\sb0\sl-276\slmult0\fi720 \up0 \expndtw-1\charsca
lex100 \ul0\nosupersub\cf19\f20\fs24 57 (1), pp. 1-32.\par\pard\li993\sb0\sl-276
\slmult0\fi0\tx1713 \up0 \expndtw-1\charscalex100 [3]\tab \up0 \expndtw0\charsca
lex100 Baker, M., Stein, J.C., Wurgler, J. 2003. \u8220?When Does the Market Mat
ter? Stock Prices and the\par\pard\li993\sb0\sl-276\slmult0\fi720 \up0 \expndtw0
\charscalex100 Investment of Equity-Dependent Firms\u8221?. \ul0\nosupersub\cf32
\f33\fs24 Quarterly Journal of Economics \ul0\nosupersub\cf19\f20\fs24 118 (3)
, pp. 969-\par\pard\li993\sb0\sl-276\slmult0\fi720 \up0 \expndtw-1\charscalex10
0 1005.\par\pard\ql \li993\sb0\sl-273\slmult0\tx1713 \up0 \expndtw-4\charscalex1
00 [4] \tab \up0 \expndtw0\charscalex100 Bartov, Eli and Myungsun Kim, 2004. \
u8220?Risk, Mispricing, and Value Investing\u8221?, \ul0\nosupersub\cf32\f33\fs2
4 Review of \par\pard\ql \li1713\sb1\sl-257\slmult0 \up0 \expndtw-5\charscalex10
0 Quantitative Finance and Accounting \ul0\nosupersub\cf76\f77\fs24 23 (4), pp.
353-376. \par\pard\ql \li993\sb8\sl-276\slmult0\tx1713 \up0 \expndtw-4\charscale
x100 \ul0\nosupersub\cf19\f20\fs24 [5] \tab \up0 \expndtw-3\charscalex100 Bloomf
ield, Robert and Roni Michaely, 2004. \u8220?Risk or Mispricing? From
the Mouths of \par\pard\ql \li1713\sb4\sl-276\slmult0 \up0 \expndtw-4\charscal
ex100 Professionals\u8221?, \ul0\nosupersub\cf32\f33\fs24 Financial Management\u
l0\nosupersub\cf19\f20\fs24 33 (3), pp. 61-81. \par\pard\ql \li993\sb4\sl-276\s
lmult0\tx1713 \up0 \expndtw-4\charscalex100 [6] \tab \up0 \expndtw0\charscalex10
2 Chang, Xin., Robert Faff, Wing Chun Kwok, George Wong. 2005. \u8220?Financia
l Constraints, \par\pard\ql \li1713\sb4\sl-276\slmult0 \up0 \expndtw-4\charscale
x100 Mispricing and Corporate Investment\u8221?, \ul0\nosupersub\cf32\f33\fs24 W
orking Paper \ul0\nosupersub\cf19\f20\fs24 SSRN\ul0\nosupersub\cf32\f33\fs24 . \
par\pard\li993\sb3\sl-276\slmult0\fi0\tx1713 \up0 \expndtw0\charscalex100 \ul0\n
osupersub\cf19\f20\fs24 [7]\tab \up0 \expndtw0\charscalex100 Chang, Xin., Lewis
H.K. Tam and Tek Jun Tan, George Wong. 2007. \u8220?The Real Impact of\par\pard\
li993\sb0\sl-276\slmult0\fi719 \up0 \expndtw0\charscalex100 Stock Market Mispric
ing \u8212? Evidence from Australia\u8221?, \ul0\nosupersub\cf32\f33\fs24 Pacifi
c-Basin Finance Journal\ul0\nosupersub\cf19\f20\fs24 15, pp.\par\pard\li993\sb0
\sl-276\slmult0\fi720 \up0 \expndtw0\charscalex100 388-408.\par\pard\li993\sb0\s
l-276\slmult0\fi0\tx1713\tx6266\tx6950 \up0 \expndtw0\charscalex100 [8]\tab \up0
\expndtw0\charscalex100 Chen, Qi., Itay Goldstein and Wei Jiang,\tab \up0
\expndtw0\charscalex100 2005.\tab \up0 \expndtw0\charscalex100 \u8220?Price In
formativeness and Investment\par\pard\li993\sb0\sl-276\slmult0\fi719 \up0 \exp
ndtw0\charscalex100 Sensitivity to Stock Price\u8221?. \ul0\nosupersub\cf32\f33\
fs24 Proceeding\ul0\nosupersub\cf19\f20\fs24 \ul0\nosupersub\cf32\f33\fs24 The
14th Annual Conference on Financial Economics\par\pard\li993\sb0\sl-276\slmult0\
fi720 \up0 \expndtw0\charscalex100 and Accounting at Indiana University.\par\par
d\li993\sb0\sl-276\slmult0\fi0\tx1713 \up0 \expndtw0\charscalex100 \ul0\nosupers
ub\cf19\f20\fs24 [9]\tab \up0 \expndtw0\charscalex100 Chirinko, R.S. and Schalle
r, H., 2007. \u8220?Fundamentals, Misvaluation, and Investment: The Real\par\par
d\li993\sb0\sl-276\slmult0\fi719 \up0 \expndtw0\charscalex100 Story\u8221?. \ul0

\nosupersub\cf32\f33\fs24 CESifo Working Paper Series\ul0\nosupersub\cf19\f20\fs
24 No. 1922.\par\pard\li993\sb0\sl-276\slmult0\fi0\tx1713 \up0 \expndtw0\charsc
alex100 [10]\tab \up0 \expndtw0\charscalex100 Cleary, S., 1999. \u8220?The Relat
ionship Between Firm Investment and Financial Status\u8221?. \ul0\nosupersub\cf3
2\f33\fs24 Journal of\par\pard\li993\sb0\sl-276\slmult0\fi719 \up0 \expndtw0\cha
rscalex100 Finance\ul0\nosupersub\cf19\f20\fs24 54 (2), pp. 673-692.\par\pard\q
l \li993\sb1\sl-252\slmult0\tx1713 \up0 \expndtw-4\charscalex100 [11] \tab \up0
\expndtw-1\charscalex100 Dong, Ming, David Hirshleifer, Scott Richardson, and Si
ew Hong Teoh, 2006. \u8220?Does Investor \par\pard\ql \li1713\sb9\sl-276\slmult0
\up0 \expndtw-3\charscalex100 Misvaluation Drive the Takeover Market?\u8221?,\u
l0\nosupersub\cf32\f33\fs24 \ul0\nosupersub\cf19\f20\fs24 Journal of Finance 61
(2), pp. 725-762. \par\pard\ql \li993\sb4\sl-276\slmult0\tx1713 \up0 \expndtw-4
\charscalex100 [12] \tab \up0 \expndtw-1\charscalex100 Dong, Ming., David Hirshl
eifer and Siew Hong Teoh. 2007, \u8220?Stock Market Misvaluation and \par\pard\q
l \li1713\sb4\sl-276\slmult0 \up0 \expndtw-4\charscalex100 Corporate Investment\
u8221?, \ul0\nosupersub\cf32\f33\fs24 MPRA Paper \ul0\nosupersub\cf19\f20\fs24 N
o. 3109\ul0\nosupersub\cf32\f33\fs24 . \par\pard\ql \li993\sb4\sl-276\slmult0\tx
1713 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf19\f20\fs24 [13] \tab \up0
\expndtw0\charscalex102 Fazzari, S.M., Hubbard, R.G., Petersen, B.C., 1988. \u
8220?Financing Constraints and Corporate \par\pard\ql \li1713\sb1\sl-256\slmult0
\up0 \expndtw-5\charscalex100 Investment\u8221?, \ul0\nosupersub\cf32\f33\fs24
Brookings Paper on Economic Activity \ul0\nosupersub\cf19\f20\fs24 19 (1), pp. 1
41-206. \par\pard\ql \li993\sb8\sl-276\slmult0\tx1713 \up0 \expndtw-4\charscalex
100 [14] \tab \up0 \expndtw0\charscalex100 Furstenberg, George M., 1977. \u8220?
Corporate Investment: Does Market Valuation Matter in the \par\pard\ql \li1713\s
b4\sl-276\slmult0 \up0 \expndtw-5\charscalex100 Aggregate?\u8221?, \ul0\nosupers
ub\cf32\f33\fs24 Brookings Papers on Economic Activity \ul0\nosupersub\cf19\f20\
fs24 8 (2), pp. 347-408. \par\pard\li993\sb11\sl-276\slmult0\fi0\tx1713 \up0 \ex
pndtw0\charscalex100 [15]\tab \up0 \expndtw0\charscalex100 Holmstrm, Bengt, 1999.
Managerial Incentive Problems: A Dynamic Perspective. \ul0\nosupersub\cf32\f33\
fs24 Review of\par\pard\li993\sb0\sl-276\slmult0\fi720 \up0 \expndtw0\charscalex
100 Economic Studies\ul0\nosupersub\cf19\f20\fs24 66 (1), pp.169-182\par\pard\q
l \li993\sb1\sl-252\slmult0\tx1713 \up0 \expndtw-4\charscalex100 [16] \tab \up0
\expndtw-1\charscalex100 Hovakimian, Armen, Tim Opler and Sheridan Titman., 2001
. \u8220?The Debt-Equity Choice\u8221?,\ul0\nosupersub\cf32\f33\fs24 The \par\p
ard\ql \li1713\sb9\sl-276\slmult0 \up0 \expndtw-5\charscalex100 Journal of Finan
cial and Quantitative Analysis \ul0\nosupersub\cf19\f20\fs24 36, pp. 1-24 \par\p
ard\ql \li993\sb4\sl-276\slmult0\tx1713 \up0 \expndtw-4\charscalex100 [17] \tab
\up0 \expndtw0\charscalex100 Kaaro, Hermeindito, 2004, \u8220?\ul0\nosupersub\cf
32\f33\fs24 Informasi Asimetri dan Kontrol Manajemen: Analisis Kepekaan \par\par
d\ql \li1713\sb4\sl-276\slmult0\tx9676 \up0 \expndtw0\charscalex100 Investasi d
an Leverage Terhadap Pemilihan Sumber-Sumber Pendanaan\ul0\nosupersub\cf19\
f20\fs24 \u8221? \tab \up0 \expndtw-4\charscalex100 [Asymmetric \par\pard\ql \li
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