Secrecy culture and sensitivity of investment to stock prices: Evidence from emerging markets

Barbara Abou Tanos, Omar Farooq and Neveen Ahmed

Journal of International Financial Markets, Institutions and Money, 2024, vol. 96, issue C

Abstract: This paper investigates the effect of secrecy culture on the relationship between corporate investments and stock prices. We argue that managers from secretive cultures are more likely to rely on stock prices as an additional source of information, thereby leading to greater sensitivity of their investments to stock prices. Consistent with our arguments, we show that firms headquartered in countries with higher levels of secrecy culture exhibit stronger sensitivity of corporate investments to stock prices. Our results hold across various estimation strategies, in different sub-samples and for alternative proxies of secrecy culture and corporate investments. Furthermore, we show that investments exhibit greater sensitivity to stock prices of peer firms in countries that score high on secrecy.

Keywords: Culture; Secrecy; Capital expenditures; Stock prices; Emerging markets (search for similar items in EconPapers)
JEL-codes: D82 G30 O16 Z1 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:96:y:2024:i:c:s1042443124001112

DOI: 10.1016/j.intfin.2024.102045

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