Distracted Shareholders and Corporate Actions

Investor attention matters for corporate actions. Our new identification approach constructs firm-level shareholder "distraction" measures, by exploiting exogenous shocks to unrelated parts of institutional shareholders' portfolios. Firms with "distracted" shareholders are m...

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Bibliographic Details
Published in:The Review of financial studies 2017-05, Vol.30 (5), p.1660-1695
Main Authors: Kempf, Elisabeth, Manconi, Alberto, Spalt, Oliver
Format: Article
Language:English
Subjects:
Abnormal returns
Attention
Distraction
Dividends
Investors
Portfolios
Stock options
Stockholders
Studies
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Summary:Investor attention matters for corporate actions. Our new identification approach constructs firm-level shareholder "distraction" measures, by exploiting exogenous shocks to unrelated parts of institutional shareholders' portfolios. Firms with "distracted" shareholders are more likely to announce diversifying, value-destroying, acquisitions. They are also more likely to grant opportunistically timed CEO stock options, more likely to cut dividends, and less likely to fire their CEO for bad performance. Firms with distracted shareholders have abnormally low stock returns. Combined, these patterns are consistent with a model in which the unrelated shock shifts investor attention, leading to a temporary loosening of monitoring constraints.
ISSN:0893-9454
1465-7368
DOI:10.1093/rfs/hhw082