Does the Stock Market Make Firms More Productive? / Benjamin Bennett, René Stulz, Zexi Wang.

Format:

Book

Author/Creator:

Bennett, Benjamin.

Contributor:

National Bureau of Economic Research.

Stulz, René.

Wang, Zexi.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24102.

NBER working paper series no. w24102

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

We test the hypothesis that greater stock price informativeness (SPI) leads to higher firm-level productivity (TFP). Management, directly or indirectly, learns more from more informative stock prices, so that more informative stock prices should make firms more productive. We find a positive relation between SPI and TFP. The relation is stronger for smaller, younger, riskier, less capital-intensive, and financially-constrained firms. Product market competition and better governance amplify the relation, while diversification weakens it. We address endogeneity concerns with fixed effects, instrumental variables, and the use of brokerage house research department closures and S&P 500 additions as plausibly exogenous events.

Notes:

Print version record

December 2017.