Simultaneous Analysis of Corporate Investment, Dividend, and Finance : Empirical Evidence Under High Uncertainty

This paper analyzes interdependence of three financial policies, investment decision, financing decision, and dividend policy. Interdependent relationship between the three has been extensively debated within literature of finance. While many studies have been conducted to normal economic condition, this paper, however, attempts to examine the relationships between the three policies in uncertainty conditions. Three-stage least square and seemingly unrelated regressions are complementarily used to this study because there are partially simultaneity problems.Two major research findings can be summarized as follows. First, there is partially interdependence of financial policies. Investment decision positively influences financing decision, there is negative relationship between financing and dividend decisions, and dividend decision negatively influences investment decision. Second, pecking order theory is superior to agency theory in explaining the managerial behavior in making financial policies