How Informed Stock Trading Can Affect Labor Investment Efficiency

Hamdi Ben-Nasr () and Abdullah Alshwer ()
Additional contact information
Hamdi Ben-Nasr: King Saud University
Abdullah Alshwer: King Saud University

No 2304077, Proceedings of Business and Management Conferences from International Institute of Social and Economic Sciences

Abstract: In this paper, we examine whether managers use information included in stock prices when making labor investment decisions. Specifically, we examine whether stock price informativeness affects labor investment efficiency. We find that a higher probability of informed trading (PIN) is associated with lower deviations of labor investment from the level justified by economic fundamentals i.e., higher labor investment efficiency. This finding is robust to using alternative proxies for stock price informativeness and labor investment efficiency, when we control for earnings quality and mispricing, and when we address endogeneity issues. Furthermore, we examine how the impact of stock price informativeness on labor investment efficiency depends on labor union and financial constraints. Particularly, we find stock price informativeness helps mitigating the adverse effects of labor union and financial constraints on labor investment, respectively. Collectively, our results highlight the importance of information included in stock prices for the investment in human capital.

Keywords: Stock Price Informativeness, Private Information; Managerial learning, Investment Efficiency; Labor Investment; Corporate Governance (search for similar items in EconPapers)
JEL-codes: G15 G31 G34 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2015-06
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Proceedings of the Proceedings of the 1st Business & Management Conference, Vienna, Jun 2015, pages 39-76

Downloads: (external link)
https://iises.net/proceedings/business-management- ... =23&iid=004&rid=4077 First version, 2015

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:sek:ibmpro:2304077

Access Statistics for this paper

More papers in Proceedings of Business and Management Conferences from International Institute of Social and Economic Sciences
Bibliographic data for series maintained by Klara Cermakova ().