Dynamic q-theory with agency investment frictions and cross-sectional stock returns

Lei Mao (Finance Group, Warwick Business School University of Warwick), Mike Qinghao Mao (Finance Group, Department of Business Economics Erasmus University Rotterdam), K. C. John Wei (Department of Finance Hong Kong University of Science and Technology)

We investigate the impact of managerial investment diversion on a firm's investment paths and the investment-return relation in a dynamic q-theory model. When efficiency of investment is not observed by shareholders, the manager may divert investment for private benefits. An agency investment friction emerges from the cost associated with high-powered managerial compensations to prevent the investment diversion. The state-dependency of agency investment frictions predicts cross-sectional variations in the relation between investment and subsequent stock returns. Our empirical results are consistent with the model predictions and suggest that managerial agency costs influence investment levels and stock returns across U.S. firms

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Year of publication:	December 2015 ; Last revised: 26 Jan 2016
Authors:	Mao, Lei ; Mao, Mike Qinghao ; Wei, K. C. John
Publisher:	Coventry, UK : Warwick Business School
Subject:	Kapitalmarktrendite \| Capital market returns \| Tobins Q \| Tobin's Q \| Prinzipal-Agent-Theorie \| Agency theory

Extent:	1 Online-Ressource (circa 51 Seiten) Illustrationen
Series:	WBS Finance Group research paper
Type of publication:	Book / Working Paper
Language:	English
Other identifiers:	10.2139/ssrn.2683926 [DOI]
Classification:	G12 - Asset Pricing ; G14 - Information and Market Efficiency; Event Studies ; G34 - Mergers; Acquisitions; Restructuring; Corporate Governance ; D82 - Asymmetric and Private Information
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10011659514