Department of Accounting & Finance
Permanent URI for this collectionhttps://hdl.handle.net/11274/9565
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Browsing Department of Accounting & Finance by Subject "Agency cost of debt"
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Item Managerial over-optimism and agency costs of debt: Evidence from high-tech IPO firms in Korea(Taylor & Francis, 2021-01-15) Choi, Wonseok; Chune, Young Chung; Kim, Kyung Soon; https://orcid.org/0000-0003-3215-8091We examine whether the combination of agency costs of debt and managerial optimism in high-tech IPOs creates inefficient R&D investment, thus undermining corporate value. We find that high-tech IPO firms with a high debt ratio exhibit a positive relationship between discretionary and future R&D expenses at the IPO point. We also find a negative relationship between discretionary R&D expenses and the long-term cumulative abnormal return. Furthermore, managerial optimism and agency costs of debt can increase during an IPO, reducing future value. Thus, a stock return decrease after an IPO may be influenced by management’s psychological errors and shareholders’ preferences for risky investments.