The association between the investment opportunity set and corporate financing and dividend decisions: some Australian evidence

Abstract

Summarizes previous research on the investment opportunity set (IOS) using price‐based and investment‐based proxies and variance measures; and develops hypotheses on the relationship between IOS, debt/equity ratios and dividend policies. Tests them on 1990‐1998 data from listed Australian companies and explains the methodology, which builds on Gover and Gover (1993) by including more recent proxy variables. Finds no significant results from low growth firms, although some high growth firms show lower debt/equity ratios and dividends. Questions the robustness of existing IOS proxies in the Australian context and calls for further research.

Citation

Jones, S. and Sharma, R. (2001), "The association between the investment opportunity set and corporate financing and dividend decisions: some Australian evidence", Managerial Finance, Vol. 27 No. 3, pp. 48-64. https://doi.org/10.1108/03074350110767097