Technology rhetoric and institutional ownership

Panayiotis C Andreou, Kyriakos Drivas, Dennis Philip and Geoffrey Wood

The Quarterly Journal of Economics, 2025, vol. 49, issue 1, 67-93

Abstract: This article compares actual R&D spend with the managerial rhetoric around technology and innovation contained within corporate disclosures of US-listed firms. We find that, whilst actual R&D spend and patents do not entice institutional investors to increase their stock holdings, firms that espouse technology and innovation in their corporate disclosures are quite successful in drawing in short-term investors. We frame this investor behaviour within the economics of expectation literature. While managers are incentivised to draw in capital, short-horizon investors are less likely to exert due diligence and are rather persuaded by a technology narrative—that is, a ‘gold rush’ effect. This explains our finding that when there is a sudden downturn with stock price crashes, short-term investors rush to withdraw their money from firms that ‘talk tech’. Our findings have implications for managerial rewards systems, especially when these encourage managerial hype.

Keywords: Managerial narratives; Technology; Innovation; R&D; Speculative bubbles (search for similar items in EconPapers)
Date: 2025
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