... to make the discussion more realistic. Findings The authors observe that overinvestment caused by agency problems is the primary reason for I-C sensitivity when the investment expenditure is less than the internal capital; dividend payout suppresses the overinvestment caused by the agency problem...

... and firm investment, which is found in prior studies, tends to be insignificant when managerial ownership is very low; second, diversification, as an alternative firm decision to lower risk positively, relates to idiosyncratic risk despite lower managerial ownership; and third, this kind of positive...