Do managers learn from the market? Firm level evidence in merger investment
Document Type
Article
Publication Title
Finance Research Letters
ISSN
1544-6123
Volume
19
DOI
10.1016/j.frl.2016.07.005
First Page
139
Last Page
145
Publication Date
11-1-2016
Abstract
Chen, Goldstein, and Jiang (2007) first present direct evidence that managers learn from the market in internal capital investment decisions. This paper extends the research to merger investment. We report that stock price firm-specific information increases the sensitivity of merger investment to Tobin's Q. This relation is not driven by a particular subsample and is robust to diverse measures of stock price informativeness. It also holds when we control for related variables. Firms with more informative stock prices achieve better post-merger operating performance. Overall, these results suggest that managers learn new information from financial markets in making merger investment decisions.
Recommended Citation
Ouyang, W.,
&
Szewczyk, S. H.
(2016).
Do managers learn from the market? Firm level evidence in merger investment.
Finance Research Letters, 19, 139–145.
DOI: 10.1016/j.frl.2016.07.005
https://scholarlycommons.pacific.edu/esob-facarticles/342
