Strategic Information Revelation and Capital Allocation

Pedraza Morales, Alvaro

World Bank Group, Washington, DC

关键词: ACCESS TO FINANCING;    ACCOUNTING;    AFFILIATED ORGANIZATIONS;    AGENCY PROBLEM;    AMORTIZATION;   

DOI  :  10.1596/1813-9450-6995
RP-ID  :  WPS6995

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

It is commonly believed that stockprices help firms' managers make more efficient realinvestment decisions, because they aggregate informationabout fundamentals that is not otherwise known to managers.This paper identifies a limitation to this view. It showsthat if informed traders internalize that firms use pricesas a signal, stock price informativeness depends on thequality of managers' prior information. In particular,managers with low quality information would like to learnabout their own fundamentals by relying on the informationaggregated in the stock price. However, in this case, theprofitability of trading falls for informed speculators, whotherefore reduce their trading volume, reducing theinformativeness of prices. As a result, stock prices are notas useful in guiding capital toward its most productive use,leading to inefficient investment decisions. Using a sampleof U.S. publicly traded companies between 1990 and 2010, thepaper documents a positive correlation between the qualityof managerial information and stock price informativeness.Contrary to the conventional view that less informedmanagers should rely more on stock prices when makinginvestment decisions, the author finds no differences in thesensitivity of investment to stock prices for differentlevels of managerial information. The evidence suggests thatwhile firms do learn from prices, the learning channel andits effects on real investment are limited.