THE EFFECT OF MISPRICING ON INVESTMENT

• Main Authors: Wan-wen Huang, 黃琬雯
• Other Authors: Ruey-shii Chen
• Format: Others
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/748kns

碩士 === 大同大學 === 事業經營學系(所) === 102 === This paper examines domestic listed company's investment behavior during the technology bubble of the late 1990s. The main purpose of this paper is to investigate whether the stock market mispricing will affect firm’s investment decisions or not. The purpose behind this test is that whether market valuation (QMkt) is a strong driver of investment on firm policies. This paper analyzes all listed companies and non-technology companies separately in Taiwan. We show firm-level descriptive statistics and correlation coefficient analysis on the non-bubble firms and all firms. The empirical results show that there is no serious multi-collinearity problem among explanatory variables in non-bubble firms and all firms. In our standard investment regression analysis, the coefficient of QMkt is significantly positive both in financial constrained and financial unconstrained firms for the non-bubble and all firms. However, after including fundamental variable in the regressions, fundamental variable has significantly positive relationship with financial constrained and financial unconstrained firms for the non-bubble and all firms. These results mean that fundamental is an important variable for investment. Finally, after including the bubble dummy in the regressions, the results show that only financial constrained mispricing firms during the bubble period invest less. Regardless of firms is financial constrained or non-constrained, all firms will invest less during the bubble period. The results show that even include fundamental variable, misvaluation still has significantly positive relationship with investment for the financial unconstrained firms. This means that misvaluation is an important variable for investment. However, the stock overvalued during the bubble has negative effect on non-tech manufacturing firms and all firms in Taiwan.