@article{42c9221d7c6940e6a1711a8c2ce7fcc4,
title = "Abnormal investment and firm performance",
abstract = "We find a negative relation between abnormal investment and future stock performance. Such a negative relation is mainly driven by under-investment, not over-investment. Our results are robust to various estimation methods and investment models. Both delayed market reaction and agency issues may lead to the apparently anomalous return predictability of under-investment. First, market investors may not react promptly to the fundamental information contained in under-investment about a firm's future profitability, asset growth, and financial distress probability. Second, the negative relation between under-investment and future stock returns is more pronounced for firms with lower investor monitoring and higher agency costs.",
keywords = "abnormal investment, agency costs, investment, market efficiency, stock performance",
author = "Siqi Liu and Chao Yin and Yeqin Zeng",
note = "Funding Information: We would like to thank Brian Lucey (the editor), two anonymous referees, Mike Clements, Simon D{\"o}ring, Andrew Ferguson, Dimitrios Gounopoulos, Pei (Jose) Liu, Qinye Lu, Scott Richardson, Yukun Shi, Hanwen Sun, Geoffrey Tate, Jiaguo (George) Wang, and seminar participants at University of Sheffield, University of Bath, 6th Young Finance Scholars Conference 2019, IFABS 2019 Angers Conference, 4th Annual Brunel Conference in Finance, 2019 BAFA Corporate Finance and Asset Pricing Conference, 2019 Paris Financial Management Conference, and 37th International Conference of the French Finance Association for their insightful and constructive comments. The financial support from Durham University Business School is gratefully acknowledged. The paper was originally circulated as “Investment, Abnormal Investment, and Stock Returns”. Funding Information: We would like to thank Brian Lucey (the editor), two anonymous referees, Mike Clements, Simon D{\"o}ring, Andrew Ferguson, Dimitrios Gounopoulos, Pei (Jose) Liu, Qinye Lu, Scott Richardson, Yukun Shi, Hanwen Sun, Geoffrey Tate, Jiaguo (George) Wang, and seminar participants at University of Sheffield, University of Bath, 6th Young Finance Scholars Conference 2019, IFABS 2019 Angers Conference, 4th Annual Brunel Conference in Finance, 2019 BAFA Corporate Finance and Asset Pricing Conference, 2019 Paris Financial Management Conference, and 37th International Conference of the French Finance Association for their insightful and constructive comments. The financial support from Durham University Business School is gratefully acknowledged. The paper was originally circulated as “Investment, Abnormal Investment, and Stock Returns”. ",
year = "2021",
month = nov,
doi = "10.1016/j.irfa.2021.101886",
language = "English",
volume = "78",
pages = "1--18",
journal = "International Review of Financial Analysis",
issn = "1057-5219",
publisher = "Elsevier",
}