Rights statement: This is the author’s version of a work that was accepted for publication in Journal of Financial Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Financial Economics, 136 (2), 2019 DOI: 10.1016/j.jfineco.2019.09.006
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Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Does the stock market make firms more productive?
AU - Bennett, Benjamin
AU - Stulz, René
AU - Wang, Jesse
N1 - This is the author’s version of a work that was accepted for publication in Journal of Financial Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Financial Economics, 136 (2), 2019 DOI: 10.1016/j.jfineco.2019.09.006
PY - 2020/5/1
Y1 - 2020/5/1
N2 - Management, directly or indirectly,learns from its firm’s stock price, so a more informative stock price should make the firm more productive. We show that stock price informativeness increases firm productivity. We provide direct evidence of one channel through which stock price informativeness affects productivity; specifically, we find that CEO turnover is less sensitive to Tobin’s q when informativeness is lower. We predict and confirm that the productivity of smaller and younger firms, better governed firms, more specialized firms, and firms with more competition is more strongly related to the informativeness of their stock price. We further address endogeneity concerns with the use of brokerage closures, S&P 500 additions, and mutual fund redemptions as plausibly exogenous events.
AB - Management, directly or indirectly,learns from its firm’s stock price, so a more informative stock price should make the firm more productive. We show that stock price informativeness increases firm productivity. We provide direct evidence of one channel through which stock price informativeness affects productivity; specifically, we find that CEO turnover is less sensitive to Tobin’s q when informativeness is lower. We predict and confirm that the productivity of smaller and younger firms, better governed firms, more specialized firms, and firms with more competition is more strongly related to the informativeness of their stock price. We further address endogeneity concerns with the use of brokerage closures, S&P 500 additions, and mutual fund redemptions as plausibly exogenous events.
KW - Stock price informativeness
KW - TFP
KW - Firm efficiency
U2 - 10.1016/j.jfineco.2019.09.006
DO - 10.1016/j.jfineco.2019.09.006
M3 - Journal article
VL - 136
SP - 281
EP - 306
JO - Journal of Financial Economics
JF - Journal of Financial Economics
SN - 0304-405X
IS - 2
ER -