Today: Sunday, 19 May 2024
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Management
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Economy
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Development
Uncertainty, investment, and cost of equity
Volume 1, Issue 4, 2019, Pages 289 - 300
1 Master of Financial Management
Abstract :
Uncertain environmental conditions are because of changes in the operational environment where the company operates. Environmental uncertainty is random and unpredictable and is the inability of predicting the future events. Environmental uncertainty decreases the optimal allocation of resources to companies and leaves a negative effect on the level of corporate investment. Previous studies indicated that increasing the cost of equity decreases the investment rate. Thus, the present study aimed to investigate the relationship between environmental uncertainty, cost of equity, and investment. This study was applied in terms of objective and analytical in nature. In order to collect the data, the financial statements of the companies on the Tehran Stock Exchange were used. The statistical sample of this study included 120 companies listed on the Tehran Stock Exchange during 2011-2017. The findings of this study indicated that environmental uncertainty had no significant effect on corporate investment. A significant negative relationship was found between cost of equity and investment. This relationship was adjusted by environmental uncertainty. Thus, the first hypothesis of the study was rejected while the second and third hypotheses were confirmed.
Uncertain environmental conditions are because of changes in the operational environment where the company operates. Environmental uncertainty is random and unpredictable and is the inability of predicting the future events. Environmental uncertainty decreases the optimal allocation of resources to companies and leaves a negative effect on the level of corporate investment. Previous studies indicated that increasing the cost of equity decreases the investment rate. Thus, the present study aimed to investigate the relationship between environmental uncertainty, cost of equity, and investment. This study was applied in terms of objective and analytical in nature. In order to collect the data, the financial statements of the companies on the Tehran Stock Exchange were used. The statistical sample of this study included 120 companies listed on the Tehran Stock Exchange during 2011-2017. The findings of this study indicated that environmental uncertainty had no significant effect on corporate investment. A significant negative relationship was found between cost of equity and investment. This relationship was adjusted by environmental uncertainty. Thus, the first hypothesis of the study was rejected while the second and third hypotheses were confirmed.
Keywords :
Environmental uncertainty, The cost of equity, investment
Environmental uncertainty, The cost of equity, investment