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Conference Paper: Which prices to learn from? A new test of the managerial learning hypothesis
Title | Which prices to learn from? A new test of the managerial learning hypothesis |
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Authors | |
Keywords | Effects of stock market Managerial learning Cross-listing Investment Price |
Issue Date | 2016 |
Citation | The 28th Annual Conference of the Northern Finance Association (NFA 2016), Queen's University, Mont Tremblant, QC., Canada, 16-18 September 2016. How to Cite? |
Abstract | We test the managerial learning hypothesis that company managers learn from informative stock
prices when making corporate investment decisions. We employ the unique cross-listings of a
firm’s dual share types (A-shares traded in domestic bourses predominantly by domestic retail
investors and H-shares traded mainly by international institutional investors) as a laboratory.
These distinct investor bases arising from regulatory restrictions result in more informative Hshare
prices than A-share prices of the same company. Exploiting this largely exogenous
difference in price informativeness, we compare firms’ investment sensitivity to H-share and Ashare
prices, and find that firms’ investment is sensitive to H-share prices but is largely
unaffected by A-share prices. The result survives several robustness checks including an analysis
exploiting a policy change for identification. Investment sensitivity to H-shares is more
pronounced when H-share prices are likely to be more informative and when managerial
incentives are stronger, but weaker when company managers are more informed. Consistent with
informative prices enabling managers to make better investment decisions, more informative
prices are associated with better subsequent operating performance. Overall, our results are
consistent with the managerial learning hypothesis. |
Description | Session - Corporate Structure and Investments |
Persistent Identifier | http://hdl.handle.net/10722/233178 |
DC Field | Value | Language |
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dc.contributor.author | Huang, S | - |
dc.contributor.author | Xiao, J | - |
dc.contributor.author | Zou, H | - |
dc.date.accessioned | 2016-09-20T05:35:06Z | - |
dc.date.available | 2016-09-20T05:35:06Z | - |
dc.date.issued | 2016 | - |
dc.identifier.citation | The 28th Annual Conference of the Northern Finance Association (NFA 2016), Queen's University, Mont Tremblant, QC., Canada, 16-18 September 2016. | - |
dc.identifier.uri | http://hdl.handle.net/10722/233178 | - |
dc.description | Session - Corporate Structure and Investments | - |
dc.description.abstract | We test the managerial learning hypothesis that company managers learn from informative stock prices when making corporate investment decisions. We employ the unique cross-listings of a firm’s dual share types (A-shares traded in domestic bourses predominantly by domestic retail investors and H-shares traded mainly by international institutional investors) as a laboratory. These distinct investor bases arising from regulatory restrictions result in more informative Hshare prices than A-share prices of the same company. Exploiting this largely exogenous difference in price informativeness, we compare firms’ investment sensitivity to H-share and Ashare prices, and find that firms’ investment is sensitive to H-share prices but is largely unaffected by A-share prices. The result survives several robustness checks including an analysis exploiting a policy change for identification. Investment sensitivity to H-shares is more pronounced when H-share prices are likely to be more informative and when managerial incentives are stronger, but weaker when company managers are more informed. Consistent with informative prices enabling managers to make better investment decisions, more informative prices are associated with better subsequent operating performance. Overall, our results are consistent with the managerial learning hypothesis. | - |
dc.language | eng | - |
dc.relation.ispartof | Annual Conference of the Northern Finance Association, NFA 2016 | - |
dc.subject | Effects of stock market | - |
dc.subject | Managerial learning | - |
dc.subject | Cross-listing | - |
dc.subject | Investment | - |
dc.subject | Price | - |
dc.title | Which prices to learn from? A new test of the managerial learning hypothesis | - |
dc.type | Conference_Paper | - |
dc.identifier.email | Huang, S: huangsy@hku.hk | - |
dc.identifier.email | Zou, H: hongzou@hku.hk | - |
dc.identifier.authority | Huang, S=rp02052 | - |
dc.identifier.authority | Zou, H=rp01800 | - |
dc.identifier.hkuros | 263279 | - |
dc.customcontrol.immutable | sml 161005 | - |