Date of Award

Summer 2024

Degree Type

Open Access Dissertation

Degree Name

Economics, PhD

Program

School of Social Science, Politics, and Evaluation

Concentration

Finance

Advisor/Supervisor/Committee Chair

Pierangelo De Pace

Dissertation or Thesis Committee Member

Jay Prag

Dissertation or Thesis Committee Member

Joshua Tasoff

Terms of Use & License Information

Creative Commons Attribution 4.0 License
This work is licensed under a Creative Commons Attribution 4.0 License.

Rights Information

© 2024 Mohamed Ahmed Abd El Rahman Ahmed Khashbah

Keywords

Corporate Decision-Making, Digital Financial Services, Econometric Modeling, Financial Literacy, Financial Strategies, Investment Dividend Financing Interdependencies

Subject Categories

Business | Economics | Finance | Finance and Financial Management

Abstract

Corporate Decision-Making: Three Essays in Applied Finance.By Mohamed Ahmed Abd El Rahman Ahmed Khashbah Claremont Graduate University: 2024 This dissertation consists of three distinct chapters, each focusing on a different topic. Chapter 1 of this dissertation investigates the relative effectiveness of earnings and cash flows as predictors in corporate decision-making processes within the U.S. financial market. Drawing on two decades of comprehensive financial data from Compustat, encompassing the years 2000 to 2019 and involving 18,595 firm-year observations across 980 diverse companies, this study employs a robust methodological framework. Advanced statistical techniques, including regression and correlation analyses, alongside firm-specific time-series and cross-sectional estimates, are utilized to rigorously examine the determinants that influence corporate decisions. The central inquiry of the research, “Does cash flow predictability improve corporate decision-making?” is explored through a hypothesis stating that earnings are a superior predictor of future corporate investments, financing, and dividend decisions than cash flows. This hypothesis underpins the study's significance, highlighting the critical nature of accurate financial forecasting for corporate strategy, risk management, and investor relations. The methodology integrates financial analysis theories such as fundamental analysis and the efficient market hypothesis, using quantitative approaches that combine panel data analysis with regression models and comparative statistical tests. The data encompasses a broad spectrum of non-financial services companies, thus providing a comprehensive perspective. Findings suggest that earnings have a stronger correlation with future financial performance, thereby endorsing their precedence over cash flows as a forecasting tool in strategic planning and economic forecasting. These insights encourage a reemphasis on earnings in corporate planning and forecasting endeavors, with potential ramifications on investment, financing, and dividend decisions within the volatile confines of the U.S. financial market. The originality and value of the research lie in its empirical evidence and long-term outlook on the comparative predictive abilities of earnings and cash flows, which can significantly influence financial and economic policy-making and practice in the financial sector. In conclusion, this chapter contributes to the financial analysis field by offering empirical evidence on the predictiveness of earnings versus cash flows, with implications for corporate governance, investment strategies, and economic policymaking. The study's outcomes provide valuable insights into the enhanced role of earnings as a predictive tool, thereby aiding more informed and economically sound corporate decision-making. Chapter 2 of this dissertation, using simultaneous equation estimation delves into the interdependencies of corporate decision-making across different sectors of the U.S. economy, with a specific concentration on the entanglement of endogeneity and interdependencies. The study uses a large dataset of 29,810 observations from 1,355 US firms categorized by Standard Industrial Classification (SIC) codes. It is based on a quantitative analysis using advanced econometric models like Instrumental Variables (IV), Two-Stage Least Squares (2SLS), Three-Stage Least Squares (3SLS), and the Generalized Method of Moments (GMM). Utility and financial firms were carefully left out of the dataset. The study meticulously untangles the relationship between investment (INVTit), dividends (DIVIDit), and financing (LEVGit) decisions, utilizing a per-share basis calculation for dividends and investments and the ratio of total liabilities to total assets for leverage. The findings robustly support the sector-specific variability hypothesis, demonstrating distinct interdependencies reflective of unique sector-specific economic and regulatory contexts. The empirical evidence, reinforced by rigorous robustness checks, underscores the superior applicability of the GMM approach over 2SLS and 3SLS in this context, with internal instruments proving to be both potent and valid. This chapter, therefore, not only enriches the existing financial economics literature with its nuanced sectoral analysis but also serves as a valuable tool for practitioners and policymakers by offering a granular understanding of the financial decision-making landscape across various sectors. Chapter 3 This study investigates the impact of transaction costs and financial literacy on the adoption of online banking in Egypt, aiming to identify primary barriers and understand the broader economic implications in an emerging market. Using a mixed-methods approach, the research uses multi-regression analysis to assess the influence of financial literacy and transaction costs, with surveys measuring financial literacy, overconfidence, numeracy, and attitudes towards online banking, in addition, we interview participants to clarify the facts of the study and questionnaire. The findings reveal a significant relationship between financial literacy levels, transaction costs, and online banking adoption, highlighting key barriers such as security concerns, technological proficiency, institutional trust, perceived complexity, and a preference for personal interaction. The study suggests that banking institutions and policymakers should implement educational programs to improve financial literacy, enhance security features, simplify online banking interfaces, and maintain personal customer service to increase online banking uptake. This research, focused on Egypt's unique socio-economic context, provides valuable insights into digital banking adoption trends and barriers, emphasizing the interplay between costs, literacy, and behavioral economics.

ISBN

9798383704431

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