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| Author: | Chari, A. Henry, P.B. |
| Title: | Firm-specific information and the efficiency of investment |
| Journal: | Journal of Financial Economics
2008 : MAR, VOL. 87:3, p. 636-655 |
| Index terms: | finance investment efficiency growth companies capital account liberalization stock markets models |
| Language: | eng |
| Abstract: | In the three-year period following stock market liberalizations, the growth rate of the typical firm's capital stock exceeds its pre-liberalization mean by an average of 4.1 percentage points (here as: p-pt/s.). Cross-sectional changes in investment are significantly correlated with the signals about fundamentals embedded in the stock price changes occuring upon liberalization. Panel-data estimations show that a 10-p-pt/s. increase in a firm's expected future sales growth predicts a 2.9- to 3.5-p-pt/s. increase in the growth rate of its capital stock. Country-specific changes in the cost of capital drive changes in investment. Yet, firm-specific changes in the cost of capital don't. |
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