Firm-Specific Information and the Efficiency of Investment

Anusha Chari and Peter Blair Henry

No 12186, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use a new firm-level dataset to examine the efficiency of investment in emerging economies. In the three-year period following stock market liberalizations, the growth rate of the typical firm's capital stock exceeds its pre-liberalization mean by an average of 5.4 percentage points. Cross-sectional changes in investment are significantly correlated with the signals about fundamentals embedded in the stock price changes that occur upon liberalization. Panel data estimations show that a 1-percentage point increase in a firm's expected future sales growth predicts a 4.1-percentage point increase in its investment; country-specific changes in the cost of capital predict a 2.3-percentage point increase in investment; firm-specific changes in risk premia do not affect investment.

JEL-codes: E F G (search for similar items in EconPapers)
Date: 2006-05
New Economics Papers: this item is included in nep-cfn, nep-fmk, nep-mac and nep-rmg
Note: CF IFM
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Citations: View citations in EconPapers (8)

Published as Chari, Anusha & Blair Henry, Peter, 2008. "Firm-specific information and the efficiency of investment," Journal of Financial Economics, Elsevier, vol. 87(3), pages 636-655, March.

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Journal Article: Firm-specific information and the efficiency of investment (2008)
Working Paper: Firm-Specific Information and the Efficiency of Investment (2007)
Working Paper: Firm-Specific Information and the Efficiency of Investment (2007)
Working Paper: Firm-Specific Information and the Efficiency of Investment (2006)
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