Skip to main content
Article
Do managers learn from the market? Firm level evidence in merger investment
Finance Research Letters
  • Wenjing Ouyang, University of the Pacific, California
  • Samuel H. Szewczyk, LeBow College of Business
Document Type
Article
DOI
10.1016/j.frl.2016.07.005
Publication Date
11-1-2016
Disciplines
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.

Citation Information
Wenjing Ouyang and Samuel H. Szewczyk. "Do managers learn from the market? Firm level evidence in merger investment" Finance Research Letters Vol. 19 (2016) p. 139 - 145 ISSN: 1544-6123
Available at: http://works.bepress.com/wenjing-ouyang/14/