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Investor Horizons and Corporate Policies

Author

Listed:
  • François Derrien

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Ambrus Kecskes

    (Schulich School of Business - York University [Toronto])

  • David Thesmar

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

Abstract

We study the effect of investor horizons on corporate behavior. We argue that longer investor horizons attenuate the effect of stock mispricing on corporate policies. Consistent with our argument, we find that when a firm is undervalued, greater long-term investor ownership is associated with more investment, more equity financing, and less payouts to shareholders. Our results do not appear to be explained by long-term investor self-selection, monitoring (corporate governance), or concentration (blockholdings). Our results are consistent with a version of market timing in which mispriced firms cater to the tastes of their short-term investors rather than their long-term investors.

Suggested Citation

  • François Derrien & Ambrus Kecskes & David Thesmar, 2013. "Investor Horizons and Corporate Policies," Post-Print hal-01069196, HAL.
    • Handle: RePEc:hal:journl:hal-01069196
    DOI: 10.1017/S0022109013000628
    as

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    Keywords

    investor horizons; corporate policies;

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