Title

The implications of conservative management practices on investment efficiency: An empirical study on Philippine publicly listed firms

Date of Publication

2016

Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Accountancy

College

Ramon V. Del Rosario College of Business

Department/Unit

Accountancy

Thesis Adviser

Herminigilda Salendrez

Defense Panel Chair

Cynthia P. Cudia

Defense Panel Member

Mark Vincent Bendo

Wilfredo Baltazar

Abstract/Summary

Due to the expected increase in business and growth opportunities brought about by the ASEAN Integration, managers in the region are faced with more pressure to invest in projects that will maximize the benefits of the economic integration. Whether investments are deemed efficient depend on a variety of factors imposed by top management on managers of the firm such as investment horizons, cost constraints, and other intangible constraints. However, investing decisions in efficient investments may be further clouded by a certain level of prudence, or conservatism, practiced by managers in managing the firms regular course of business. Through a panel data analysis of publicly-listed firms in the Philippines over a span of 10 years, we examine the effects of conservative management practices on investment efficiency. We find that conservative management practices in Philippine firms lessen investment inefficiencies in settings where firms are more likely to underinvest, have no significant effects on investment behavior in information asymmetric situations, and temper the use of external sources of funding for future investments.

In more recent times, managers in the Philippines have been exposed to an increasing number of investment opportunities domestically and abroad. Conservative management practices have been said to deter or limit inefficient firm investment undertakings, but may also contribute to inefficient firm behavior due to more prudent outlooks on expected returns, available information, and funding sources. Through panel data estimation procedures, our results show that conservative management practices in the Philippines worsen inefficiencies in investment as firms prone to underinvest tend to invest more, are not affected by situations where information is asymmetric, and temper the use of both debt and equity financing as sources of investment funding.

Abstract Format

html

Language

English

Format

Print

Accession Number

TU23357

Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

[70] leaves : illustrations (some color) ; 28 cm. + 1 computer disc ; 4 3/4 in.

Keywords

Investments--Philippines; Management--Philippines

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