Investors’ Choices and Strategic Financial Decisions of the Companies. Evidence from an Analysis of the Capital Budgeting Policy Implications on Shares Valuation

Andreea Curmei-Semenescu,Elena Valentina Ţilică,Cătălin Valeriu Curmei

doi:10.3390/su13084112

Andreea Curmei-Semenescu, Elena Valentina Ţilică + Show 1 more

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https://doi.org/10.3390/su13084112

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Abstract

The paper investigates the relationship between companies and their investors in the capital market as part of relationship marketing. It focuses on investors’ preference for a certain capital budgeting policy employed by listed companies. By using statistical analysis, we study whether investors’ reactions can be linked to different patterns of capital budgeting decisions. Our database includes a high number of countries, both developed and emerging, which leads us to focus our analysis on the differences that might occur in investors’ preferences due to specific traits of these markets. Additionally, we include a comparison between investors’ preferences and the information given by the accounting-based performance recorded both in the year of the investment policy and in the next fiscal year. Thus, we observe the extent and limits of the investors’ preference for an active capital budgeting decision, as well as the investors’ rationality around financial crisis.

Highlights

The present paper integrates into relationship marketing using a less studied perspective, that of marketing specific to capital markets
This paper integrates into relationship marketing literature, studying how strategic capital budgeting choices by companies affect investors’ decisions about the capital market regarding the shares of the respective companies
As regression analysis is not able to capture the complexity of the investment decision process, and in some cases is limited by the nature of the data, the analysis includes a statistical description that may help academics and practitioners understand some insights into investment decisions in capital markets in turbulent times

Summary

Introduction

The present paper integrates into relationship marketing using a less studied perspective, that of marketing specific to capital markets. This approach is even more important presently because of the entrance of the world economy into a crisis period generated by the COVID-19 pandemic. The aim of the study is to analyze how capital budgeting strategy of the issuers influence investors’ decisions. The choice of the period used to conduct the study is not meaningless. We focused on the period right before and after the start of the last financial crisis (which started in 2008) because crisis periods are of the utmost importance in studying investors’ behavior

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