Baker, Malcolm
[VerfasserIn]
;
Stein, Jeremy C.
[Sonstige Person, Familie und Körperschaft];
Wurgler, Jeffrey
[Sonstige Person, Familie und Körperschaft]National Bureau of Economic Research
When Does the Market Matter? Stock Prices and the Investment of Equity-Dependent Firms
Erschienen:
Cambridge, Mass: National Bureau of Economic Research, January 2002
Erschienen in:NBER working paper series ; no. w8750
Umfang:
1 Online-Ressource
Sprache:
Englisch
DOI:
10.3386/w8750
Identifikator:
Reproduktionsnotiz:
Hardcopy version available to institutional subscribers
Entstehung:
Anmerkungen:
Mode of access: World Wide Web
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Beschreibung:
We use a simple model of corporate investment to determine when investment will be sensitive to non-fundamental movements in stock prices. The key cross-sectional prediction of the model is that stock prices will have a stronger impact on the investment of firms that are 'equity dependent' - firms that need external equity to finance their marginal investments. Using an index of equity dependence based on the work of Kaplan and Zingales (1997), we find strong support for this prediction. In particular, firms that rank in the top quintile of the KZ index have investment that is almost three times as sensitive to stock prices as firms in the bottom quintile. We also verify several other predictions of the model