Polk, Christopher and Sapienza, Paola (2009) The stock market and corporate investment: a test of catering theory. Review of Financial Studies, 22 (1). pp. 187-217. ISSN 0893-9454
Full text not available from this repository.Abstract
We test a catering theory describing how stock market mispricing might influence individual firms' investment decisions. We use discretionary accruals as our proxy for mispricing. We find a positive relation between abnormal investment and discretionary accruals; that abnormal investment is more sensitive to discretionary accruals for firms with higher R&D intensity (opaque firms) or share turnover (firms with shorter shareholder horizons); that firms with high abnormal investment subsequently have low stock returns; and that the larger the relative price premium, the stronger the abnormal return predictability. We show that patterns in abnormal returns are stronger for firms with higher R&D intensity or share turnover.
| Item Type: | Article |
|---|---|
| Official URL: | http://rfs.oxfordjournals.org/ |
| Additional Information: | © 2008 The Authors |
| Divisions: | Finance |
| Subjects: | H Social Sciences > HG Finance |
| Date Deposited: | 08 Feb 2011 12:20 |
| Last Modified: | 12 Apr 2024 18:39 |
| URI: | http://eprints.lse.ac.uk/id/eprint/32275 |
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