Investor sentiment, executive compensation, and corporate investment
AbstractWe develop a model that predicts corporate investment level increases with investors' optimism and that the relationship between investment level and executive compensation depends on investor sentiment and other parameters. The empirical test shows that optimism is significantly and positively related to the level of investment and that executive compensation is insignificantly related to the level of investment. The managerial share ownership is positively related to the level of investment, conditional on the degree of optimism. The empirical results suggest that executives make investment decisions that not only cater to investor sentiment but also reflect their own interest in the company.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 34 (2010)
Issue (Month): 10 (October)
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Web page: http://www.elsevier.com/locate/jbf
Investor sentiment Corporate investment Executive compensation Behavioral finance;
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