{"title":"Do managers pay attention to the market? A review of the relationship between stock price informativeness and investment","authors":"Paulo Pereira da Silva","doi":"10.1016/j.mulfin.2020.100675","DOIUrl":null,"url":null,"abstract":"<div><p>Using a multi-country sample of stocks, the sensitivity of investment to stock price informativeness is assessed. Consistent with prior research, we find a positive association between investment and stock prices. This association becomes stronger when prices are more informative. However, while measures of price informativeness related to the amount of (market-based) private information conveyed by prices heighten the investment-to-stock price sensitivity, others, akin to the weak form of the efficient market hypothesis, hardly affect it. This is consistent with only revelatory private information acquired by traders influencing managers’ investment decisions. The relevance of private information revealed in secondary markets also extends to financing decisions, with price informativeness also shaping the association between external financing and growth opportunities. Not least importantly, we show that abnormal investment generated by the amount of private information contained in prices fosters future profitability and aggregate efficiency. In robustness tests, the presence of a causal relationship flowing from price informativeness to (abnormal) investment rates is appraised. Using two quasi-random events that enhanced the information environment of stocks (MSCI ACWI reconstitutions and the passing of JGTRRA in 2003), we present evidence that exogenous variation of the amount of private information contained in stock prices affects investment rates.</p></div>","PeriodicalId":47268,"journal":{"name":"Journal of Multinational Financial Management","volume":"59 ","pages":"Article 100675"},"PeriodicalIF":2.9000,"publicationDate":"2021-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1016/j.mulfin.2020.100675","citationCount":"5","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Multinational Financial Management","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1042444X20300645","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 5
Abstract
Using a multi-country sample of stocks, the sensitivity of investment to stock price informativeness is assessed. Consistent with prior research, we find a positive association between investment and stock prices. This association becomes stronger when prices are more informative. However, while measures of price informativeness related to the amount of (market-based) private information conveyed by prices heighten the investment-to-stock price sensitivity, others, akin to the weak form of the efficient market hypothesis, hardly affect it. This is consistent with only revelatory private information acquired by traders influencing managers’ investment decisions. The relevance of private information revealed in secondary markets also extends to financing decisions, with price informativeness also shaping the association between external financing and growth opportunities. Not least importantly, we show that abnormal investment generated by the amount of private information contained in prices fosters future profitability and aggregate efficiency. In robustness tests, the presence of a causal relationship flowing from price informativeness to (abnormal) investment rates is appraised. Using two quasi-random events that enhanced the information environment of stocks (MSCI ACWI reconstitutions and the passing of JGTRRA in 2003), we present evidence that exogenous variation of the amount of private information contained in stock prices affects investment rates.
期刊介绍：
International trade, financing and investments have grown at an extremely rapid pace in recent years, and the operations of corporations have become increasingly multinationalized. Corporate executives buying and selling goods and services, and making financing and investment decisions across national boundaries, have developed policies and procedures for managing cash flows denominated in foreign currencies. These policies and procedures, and the related managerial actions of executives, change as new relevant information becomes available. The purpose of the Journal of Multinational Financial Management is to publish rigorous, original articles dealing with the management of the multinational enterprise. Theoretical, conceptual, and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • Foreign exchange risk management • International capital budgeting • Forecasting exchange rates • Foreign direct investment • Hedging strategies • Cost of capital • Managing transaction exposure • Political risk assessment • International working capital management • International financial planning • International tax management • International diversification • Transfer pricing strategies • International liability management • International mergers.
求助内容：
应助结果提醒方式：
京公网安备 11010802042870号
