Public firm presence, growth opportunity and investment in fixed intangible assets of private UK firms

Danso, Albert; Adu-Ameyaw, Emmanuel; Boateng, Agyenim; Iyiola, Bolaji

Abstract

Purpose: Prior studies suggest that, in an industry in which several public firms operate (i.e. greater public firm presence), uncertainty about business operations within the industry is reduced due to greater analyst coverage and quality of information disclosure. In this study, the authors examine how UK private firms respond to investment opportunities in fixed intangible assets (FIAs) in an environment characterised by greater public firm presence (PFP). Design/methodology/approach: Using data from 61,278 (1,358) private (public) UK firms operating in ten sectors spanning from 2006 to 2016, the authors conduct this analysis by using panel econometric techniques. Findings: The authors observe that private firms are more responsive to their FIA investment opportunities when they operate in industries with more PFP. Also, the authors find that firms in industries with better information quality use more debt and have longer debt maturity security but less internal cash flow. Overall, the findings indicate that PFP generates positive externalities for private firms by lessening industry uncertainty and enhancing more efficient FIA investment. The results are robust to endogeneity concerns. Research limitations/implications: A key limitation of the study is that it focuses on a single country (theUK) and therefore there is a likelihood that the results found are specific to this setting but not others, particularly developing and emerging economies. Thus, future studies could explore these ideas from the viewpoint of multiple countries. Practical implications: Overall, the study demonstrates the importance of information disclosure in driving investment decisions of firms. Originality/value: While this paper builds on the information disclosure and corporate investment literature, it is one of the first attempts, to the best of the authors’ knowledge, to explore how private UK firms respond to investment in FIAs in an environment characterised by greater PFP.

• Journal Article Type: Article
• Acceptance Date: Oct 6, 2023
• Online Publication Date: Nov 20, 2023
• Publication Date: Oct 30, 2024
• Deposit Date: Dec 6, 2023
• Publicly Available Date: Dec 7, 2023
• Journal: Journal of Applied Accounting Research
• Print ISSN: 0967-5426
• Publisher: Emerald
• Peer Reviewed: Peer Reviewed
• Volume: 25
• Issue: 5
• Pages: 1016-1037
• DOI: https://doi.org/10.1108/JAAR-01-2023-0032
• Public URL: https://uwe-repository.worktribe.com/output/11490674