Investigating Effect of Governmental Ownership on the Investment Decisions of Managers

Abstract

The establishment of appropriate corporate governance mechanisms is a basic measure for the efficient use of resources, improvement of accountability, transparency, observance of fairness and the rights of all stakeholders of the company. Each of the intra and inter organizational mechanisms monitor the processes and activities of the company and improve the accountability to achieve the other strategic objectives of the company. One of these mechanisms is the institutional investors and state ownership. The purpose of this study was to evaluate the effect of governmental ownership on the investment decisions of managers in companies listed in Tehran Stock Exchange. In this study, three aspects of managers’ investment decisions including investment policy, dividend policy and financing policy are used. This study in terms of purpose is applied and in terms of methodology is causal and correlational and finally in terms of tense is ex post facto. Target population of the study includes companies listed in Tehran Stock Exchange. By using systematic elimination sampling, 102 companies during 7 years, i.e. 714 firm-years, are included in the statistical population of the study. The study period is from 2008 to 2014. To test the hypotheses, the linear regression model and ordinary least squares method were used. The results show that state ownership has a significant effect on the investment decisions of managers in all dimensions except investment policy so that it has a significant negative impact on managers’ financing policy and in contrast the state ownership has a significant positive impact on dividend policy. Other findings showed that the company's size has a significant positive impact on managers’ decision about dividend policy and financing. Return on assets has a significant positive impact on dividend policy and in contrast the rate of return on assets has a significant positive impact on financing policy. However, no significant impact was observed in the control variables of company’s size and return on assets on the investment decisions of managers. The operating cash flow has a significant positive impact on the investment decisions of managers and has also a significant positive impact on managers’ financing policy but no significant effect was observed on managers’ financing policy.