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Neoclassical Theory Of Corporate Investment

2046 Words9 Pages

2.0 Introduction

2.1 Theory
2.11 Neoclassical Theory of corporate investment
The neoclassical theory of corporate investment is based on the assumption that the management seeks to maximize the present net worth of the company, the market value of the outstanding common shares. An investment project shall be undertaken if and only if it increases the value of the shares. The securities market appraises the project, this expected to the future earnings to the company and its risk. If the value of the project as appraised by investor exceeds the cost, than the company shares will appreciate to the benefit of existing shareholders. That is, the market will value the project more than the cash used to pay for it. If new debt or securities …show more content…

The theory point of view is the market sale of all kinds of information about the products is more comprehensive than the purchaser to know more about the goods all kinds of information to understand better than the other benefit is bigger, the relevant commodity information had less knowledge of the purchaser will pay the price get more information from sellers, market information of the transfer function can reduce the loss caused by asymmetric information, information asymmetry is the inevitable defects in market economy, the government should have the regulatory effect in the market system, in order to reduce the information asymmetry of economic losses.However, owners and users in the acquisition, transmission, processing information related to the investment decision will produce deviation, so the solution of the problem of asymmetric information to improve the efficiency of investment has important practical …show more content…

Relational the record between financial reporting quality and investment efficiency has an impact between macroeconomic and corporate levels (given that investment is a major determinant of the return on capital obtained by investors). Our results by considering a comprehensive measure of investment elongate and generalize the results of before (and its sub-components), in order to financial reporting quality using multiple agents，and by specifically filing the relation between financial reporting quality and two origins of economic inefficiency, over-investment and under-investment. By the previous studies are difficult to find the relation between financial reporting quality and over-investment and

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