Distracted shareholders and corporate actions

Elisabeth Kempf, Alberto Manconi, Oliver Spalt

Research output: Contribution to journalArticleScientificpeer-review

28 Citations (Scopus)

Abstract

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.
Original languageEnglish
Pages (from-to)1660-1695
JournalThe Review of Financial Studies
Volume30
Issue number5
Early online dateSep 2016
DOIs
Publication statusPublished - May 2017

Keywords

  • behavioral corporate finance
  • investor attention
  • institutional investors

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