Growth opportunity and investment policy: The role of managerial incentives

Adu-Ameyaw, Emmanuel; Danso, Albert; Hickson, Linda

Abstract

Based on the neo-classical theory of investment (Tobin's Q), this study looks at how growth opportunity drives investment policies and the extent to which this relationship is sensitive to managerial incentives. We use data from 213 non-financial and non-utility UK FTSE 350 firms for the period 2007–2015, generating a total of 1748 firm-year observations. We uncover that growth opportunity firms invest more in fixed intangible assets but less in tangible capital assets activities. We further observe that the growth opportunity-fixed intangible assets' investment is more sensitive to executive compensation incentives. Our results remain robust to alternative econometric models.

• Journal Article Type: Article
• Acceptance Date: Mar 27, 2022
• Online Publication Date: Apr 1, 2022
• Publication Date: 2022-12
• Deposit Date: Apr 27, 2022
• Publicly Available Date: Apr 28, 2022
• Journal: Managerial and Decision Economics
• Print ISSN: 0143-6570
• Electronic ISSN: 1099-1468
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 43
• Issue: 8
• Pages: 3634-3646
• DOI: https://doi.org/10.1002/mde.3619
• Keywords: Management of Technology and Innovation; Management Science and Operations Research; Strategy and Management; Business and International Management
• Public URL: https://uwe-repository.worktribe.com/output/9422069
• Additional Information: Received: 2021-11-22; Accepted: 2022-03-27; Published: 2022-04-01