Cash Savings and Stock Price Informativeness* | Zendy

Laurent Frésard | Zendy

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Cash Savings and Stock Price Informativeness*

Author(s) -

Laurent Frésard

Publication year - 2011

Publication title -

european finance review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 4.933

H-Index - 61

eISSN - 1573-692X

pISSN - 1382-6662

DOI - 10.1093/rof/rfr004

Subject(s) - business , restricted stock , stock price , stock (firearms) , stock market , cost price , stock market bubble , private information retrieval , monetary economics , market maker , non qualified stock option , cash , economics , finance , mechanical engineering , paleontology , statistics , mathematics , horse , series (stratigraphy) , engineering , biology

International audienceThis paper shows that managers use the information they learn from the stock market when they decide on corporate cash savings. In particular, corporate savings are much more sensitive to stock price when the price contains more information that is new to managers. Moreover, the significant effect of stock price informativeness on the savings-to-price sensitivity is not due to market mispricings and remains even after controlling for various sources of public and managerial private information. Overall, the results highlight a new channel through which the stock market affects corporate decisions, which suggests that the stock market is not a sideshow

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