Abstract
We investigate the effects of legal protection of investors and equity dependence on the relationship between corporate investment and stock prices in an international setting. We find that firms in countries with strong legal protection of investors have investments that are more sensitive to their stock prices. In addition, equity-dependent firms display higher investment-stock price sensitivities than do nonequity-dependent firms, which is consistent with the equity-financing channel argument. Finally, the positive relation between legal protection and the investment-stock price sensitivity is more pronounced for equity-dependent firms than for nonequity-dependent firms. Overall, we provide evidence that both legal protection of investors and equity dependence influence managers’ corporate investment decisions with respect to changes in stock prices.
| Original language | English |
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| Publication status | Published - 3 Aug 2008 |
| Event | 2008 American Accounting Association Annual Meeting - Anaheim, United States Duration: 3 Aug 2008 → 6 Aug 2008 |
Conference
| Conference | 2008 American Accounting Association Annual Meeting |
|---|---|
| Place | United States |
| City | Anaheim |
| Period | 3/08/08 → 6/08/08 |
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