The moderating role of strategy and environment on the relationship between corporate liquidity and investment: evidence from panel data

Authors

  • Celísia Baptista ESGHT/Universidade do Algarve
  • Fernanda Matias ESGHT/Universidade do Algarve
  • Patrícia Oom do Valle FE/University of the Algarve

Keywords:

liquidity, investment, leverage, industry environment, corporate strategy

Abstract

In order to test the moderating role of corporate strategy and industry environment in the effect of liquidity on investment for Portuguese manufacturing firms, we developed a multiple linear regression model for panel data. It is a static model with three types of variables: financial; strategic/environmental; and interactive. The estimated model was validated through the Breusch-Pagan/Cook-Weisberg and Wald Modified tests (heteroscedasticity tests), Lagrange Multiplier (industry random effects test, using the two-digit National Classification of Economic Activities), Hausman robust test (fixed effects model vs. random effects model test) and likelihood-ratio test (joint effect of industry and time test). The statistical processing of the data revealed that a company’s strategy (diversification and innovation) and the industry environment (growth) moderate the effect of liquidity on investment, which can be explained by the effect of these factors on the cost of asymmetric information.

Author Biography

  • Celísia Baptista, ESGHT/Universidade do Algarve
    PhD, Adjunct Professor, ESGHT/University of Algarve Web Manager of the Journal Encontros Científicos - Tourism & Management Studies  Director of the undergraduate Course in Hotelmanagement, ESGHT/University of Algarve

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Published

29.05.2013

Issue

Section

Business/Management: Research Papers

How to Cite

Baptista, C., Matias, F., & Oom do Valle, P. (2013). The moderating role of strategy and environment on the relationship between corporate liquidity and investment: evidence from panel data. Tourism & Management Studies, 9(1), 85-91. https://tmstudies.net/index.php/ectms/article/view/551