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Seminar

The Horizon of Investors’ Information and Corporate Investment

  • Series
    Erasmus Finance Seminars
  • Speaker(s)
    Olivier Dessaint (INSEAD, France)
  • Field
    Finance, Accounting and Finance
  • Location
    Erasmus University Rotterdam, Sanders 0-12
    Rotterdam
  • Date and time

    September 17, 2024
    11:45 - 13:00

Abstract

We show that the quality of investors’ information across horizons has real effects. When managers focus on current stock prices, they under-invest if their price imperfectly reflects the value of their projects. We posit that this under-investment is larger when the horizon at which investors obtain information does not match the horizon of firms’ investment projects. Using a new hand-collected measure of projects' horizon, we test and confirm this hypothesis: Empirically, improvements in the quality of investors' information about long-term (short-term) cash flows induce firms with long-term (short-term) projects to invest more, particularly when managers prioritize current stock prices.