The Stock Market Reaction to Investment Decisions: Evidence from Italy

Emanuele Bajo, Marco Bigelli and Sandro Sandri ()

Journal of Management & Governance, 1998, vol. 2, issue 1, 16 pages

Abstract: Based on a study of new investment announcements from 1989 to 1995 by Italian firms listed on the Milan Stock Exchange, we find a positive stock price reaction to new investment decisions. The stock price reaction is larger for joint venture announcements. The market response is also larger for non-state owned companies and when the announcement is released in a period of rising stock prices. The announced investment has no impact on the non-voting shares but increases the voting shares' market price through a significant revaluation of their vote-segment. We find some evidence that new investments lead to management's private benefits rather than towards firm value. This is consistent with the typical Italian corporate governance structure, where a majority shareholder safely controls a listed company while having only a fractional claim on the firm's cash flows. Copyright Kluwer Academic Publishers 1998

Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1023/A:1009945224561 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:kap:jmgtgv:v:2:y:1998:i:1:p:1-16

Ordering information: This journal article can be ordered from
http://www.springer. ... 29/journal/10997/PS2

DOI: 10.1023/A:1009945224561

Access Statistics for this article

Journal of Management & Governance is currently edited by Lino Cinquini

More articles in Journal of Management & Governance from Springer, Accademia Italiana di Economia Aziendale (AIDEA) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().