Underinvestment vs. overinvestment
evidence from price reactions to pension contributions
Informazioni aggiuntive
Autori
Tipo
Articolo pubblicato in rivista scientifica
Anno
2008
Lingua
Inglese
Sommario
Mandatory contributions to defined benefit pension plans provide a unique identification strategy to estimate the market's assessment of the value of internal resources controlling for investment opportunities. The price decrease following a pension-induced drop in cash is magnified for firms that appear a priori more financially constrained, suggesting a negative effect of financing frictions on investment. In contrast, low control on managerial discretion attenuates the negative price reaction to contributions consistent with empire-building theories. While overinvestment seems to be the prevalent distortion in a panel of large firms, underinvestment appears to dominate in a sample that is more representative of the cross-section of listed companies.
Parole chiave
Financial constraints, corporate governance, underinvestment, overinvestment
Periodico
Journal of financial economics
Volume
92
Numero ( Mese )
3
Pagine (o numero dell’articolo)
491-518
Diffusione
Licenza
Licenza non definita
Visibilità
Pubblico
Status open access
Green
