The Effect of Managerial Optimism On Corporate Investment of Financially Constrained Firms – Evidence From Emerging Markets

The objective of this study is to identify the impact of managerial optimism on the corporate investment decisions of financially constrained firms in Jordan during the 2013–2019 period. The sample consists of 56 companies from the industrial and services sectors. The data was sourced from the annual reports of the sampled firms listed on the Amman Stock Exchange (ASE). The research methodology is based on the KZ index to measure the financial constraints of the sample companies under investigation and the directors' dealings to measure the managerial optimism. The study sample was analyzed using multiple fixed effects panel regression with capital expenditures as a measurement of investment level and cash flow, Tobin's Q, leverage, managerial optimism, and the interaction between optimism and cash flow as independent variables. The findings clearly show that managerial optimism has an impact on the investment levels of financially constrained companies in Jordan. As such, optimism might encourage the administration to invest more