Effects of Managerial Sentiments and Financial Constraints on Investment Sensitivity

Abstract: In the present study, managerial sentiment refers to the pleasant and optimistic feeling of the managers and decision makers in the companies. Optimism can be considered a spiritual state showing ones hope for the future. Talking about a company, it is the manger’s hope for future of the company. Accordingly, the present study examines effects of the managerial optimism on the relationship between investment and cash flow in the company, as well as the moderating effect of financial constraints on this relationship. To do so, we used data of 150 companies listed in Tehran Stock Exchange from 2011 to 2015, multiple regression, as well as panel data model. The results suggested that the manager’s optimism cannot have a significant effect on the investment-cash flow relationship; and the financial constraint enhances and signifies the effect of manager’s optimism on the investment-cash flow relationship.