Which Firms Follow the Market? An Analysis of Corporate Investment Decisions
We test whether stock market mispricing or private investor information in stock prices affects corporate investment. We develop an econometric methodology that disentangles stock-price movements that are relevant for investment from those that are not. We combine this decomposition with proxies for private information and mispricing to devise unbiased tests for the effects of mispricing and information on investment. We depart from much of the literature by finding that stock market mispricing does not affect investment, especially that of large firms and firms subject to mispricing. In contrast, we confirm previous evidence that managers incorporate private investor information when making investment decisions. The Author 2010. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: firstname.lastname@example.org., Oxford University Press.
Volume (Year): 23 (2010)
Issue (Month): 5 ()
|Contact details of provider:|| Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.|
Web page: http://www.rfs.oupjournals.org/
More information through EDIRC
|Order Information:||Web: http://www4.oup.co.uk/revfin/subinfo/|
When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:23:y:2010:i:5:p:1941-1980. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.