Investments, liquidity of shares and quality of management

The author examines the complex relationship between stock liquidity, financial flexibility, management quality and investments of Russian public companies. The cost and volume of fixed assets affect the size of an organisation’s assets, which, in turn, determines the share price. The share price is an objective indicator of the financial position of the company. The quality of management allows you to assess the company’s ability to attract investments. The liquidity of shares has a causal relationship with investments. Financial flexibility affects management's ability to adjust the capital structure in order to attract additional capital investments. In addition, financial flexibility allows the company to respond quckly to investor proposals in the face of restrictive (sanction) measures. The management of Russian companies affects not only the share price (risk adjustment), but also the investment opportunities. The author identifies criteria for management integrity in the implementation of investments. Information asymmetry affects the financial policy of the company. Investment opportunities are favourable under a balanced financial policy and in the presence of high quality property collateral. Companies with a high level of property security have the necessary debt capacity, i.e. the ability to meet their obligations to creditors in a timely manner. Assets determine not only the share price, but also the financial position and investment attractiveness of a commercial organisation. Property security is an important factor in deciding on the choice of funding source, taking into account its price (adverse selection problem). The author presents the evaluation results using a dynamic panel data model (the Arellano-Bond – the generalised method of moments). The model allows us to solve the problem of endogeneity – the correlation of explanatory variables with an error in the regression.

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