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Real effects of stock underpricing

Lai, Sandy
Published in Journal of Financial Economics. 2013, vol. 108, p. 392-408
Abstract This paper provides evidence for a causal effect of equity prices on corporate investment and employment. We use fire sales by distressed equity funds during the 2007–2009 financial crisis to identify substantial exogenous underpricing. Firms whose stocks are most under- priced have considerably lower investment an d employment than industry peers not subject to any fire sale discount. The causal effect of underpric ing on investment is found to be largely concentrated on the most financially constrained firms.
Keywords Market inefficiencyFire salesMutual fundInvestment Employment
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HAU, Harald, LAI, Sandy. Real effects of stock underpricing. In: Journal of Financial Economics, 2013, vol. 108, p. 392-408. https://archive-ouverte.unige.ch/unige:85434

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Deposited on : 2016-07-25

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