The Horizon of Investors' Information and Corporate Investment
-
Series
-
SpeakersOlivier Dessaint (INSEAD, France)
-
FieldFinance, Accounting and Finance
-
LocationTinbergen Institute Amsterdam, room 1.01
Amsterdam -
Date and time
May 29, 2024
12:45 - 14:00
Abstract
We investigate whether the quality of investors’ information across horizons influences corporate investment. In our theory, managers under-invest because their stock price imperfectly reflects the value created by their projects. This effect is stronger when there is a mismatch between the horizon of the projects’ cash flows and the horizon at which investors obtain information. Using a new hand-collected measure of projects’ horizon, we find that improvements in the quality of investors’ long-term (short-term) information induce firms with long-term (short-term) projects to invest more, particularly when managers prioritize current stock prices. Hence, the quality of investors’ information across horizons matters. Joint with Thierry Foucault and Laurent Fresard.