Industry Specific Effects in Investment Performance and Valuation of Firms - Marginal q in a Stock Market Bubble
AbstractA necessary criterion for a performance measure in corporate governance is the degree to which it mirrors how well the management succeeds in maximizing firm value. Such a performance measure is marginal q which links changes in firm value to the investments decided by the management. Empirical studies of investment and performance based on marginal q have demonstrated the usefulness of this measure. Most research however, has mainly focused on long-term performance. This paper takes a short-term perspective and, based on the marginal q-theory, considers how market values change in the extreme stock price cycle of a stock market bubble. We find an anomaly in form of a new industry specific effect that, in addition to investment, explains changes in firm value.
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Bibliographic InfoPaper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 45.
Length: 17 pages
Date of creation: 28 Dec 2005
Date of revision:
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Marginal q; Investment; Stock bubbles; Different industries;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-01 (All new papers)
- NEP-BEC-2006-01-01 (Business Economics)
- NEP-FIN-2006-01-01 (Finance)
- NEP-FMK-2006-01-01 (Financial Markets)
- NEP-RMG-2006-01-01 (Risk Management)
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