Catering through Nominal Share Prices

Malcolm Baker, Robin Greenwood and Jeffrey Wurgler

Journal of Finance, 2009, vol. 64, issue 6, 2559-2590

Abstract: We propose and test a catering theory of nominal stock prices. The theory predicts that when investors place higher valuations on low‐price firms, managers respond by supplying shares at lower price levels, and vice versa. We confirm these predictions in time‐series and firm‐level data using several measures of time‐varying catering incentives. More generally, the results provide unusually clean evidence that catering influences corporate decisions, because the process of targeting nominal share prices is not well explained by alternative theories.

Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (77)

Downloads: (external link)
https://doi.org/10.1111/j.1540-6261.2009.01511.x

Related works:
Working Paper: Catering Through Nominal Share Prices (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:64:y:2009:i:6:p:2559-2590

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().