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Institutional attention and investment efficiency

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  • Jiayi Zheng

Abstract

This study investigates how institutional investors' attention on the earnings announcement day affects corporate investment decisions. I find that the investment of firms receiving abnormal institutional attention is approximately 1.8 times more sensitive to their stock price than that of others. This effect is more pronounced when institutional investors have greater incentives to produce information and when corporate managers have greater incentives and capability to employ the incremental information contained in the stock price. These findings suggest that attention encourages institutional investors to incorporate private information into stock prices, which provides a useful guide for managers' investment decisions.

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  • Jiayi Zheng, 2024. "Institutional attention and investment efficiency," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(4), pages 3241-3273, December.
    • Handle: RePEc:bla:acctfi:v:64:y:2024:i:4:p:3241-3273
    DOI: 10.1111/acfi.13250
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