Industry specific effects in investment performance and valuation of firms

A necessary criterion for a performance measure in corporate governance is the degree to which it mirrors how well the management succeeds in maximizing firm value. Such a performance measure is marginal q which links changes in firm value to the investments undertaken by the management. Empirical s...

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Bibliographic Details
Published in:Empirica 2008, Vol.35 (3), p.279-291
Main Authors: Bjuggren, Per-Olof, Wiberg, Daniel
Format: Article
Language:English
Subjects:
Business and economics
Capital markets
Corporate Governance
Different industries
Econometrics
Economic models
Economics
Economics and Finance
Ekonomi
European Integration
Expected values
Financial performance
G14
G31
G34
Industrial Organization
International Economics
Investment
Investment policy
Investments
L21
Macroeconomics/Monetary Economics//Financial Economics
Marginal q
Net present value
Original Paper
Prices
Public Finance
Recessions
SAMHÄLLSVETENSKAP
Securities markets
SOCIAL SCIENCES
Stock bubbles
Stock prices
Stockholders
Studies
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Summary:A necessary criterion for a performance measure in corporate governance is the degree to which it mirrors how well the management succeeds in maximizing firm value. Such a performance measure is marginal q which links changes in firm value to the investments undertaken by the management. Empirical studies of investment and performance based on marginal q have demonstrated the usefulness of this measure. Most research however, has mainly focused on long-term performance. This paper takes a short-term perspective and, based on the marginal q -theory, considers how firms’ market values change in the extreme stock price cycle of a stock market bubble. Using a data set of listed Swedish corporations we find an anomaly in form of a new industry specific effect that, in addition to investment, explains changes in firm value.
ISSN:0340-8744
1573-6911
1573-6911
DOI:10.1007/s10663-008-9064-5