Abstract
Using a large panel of Australian firms, we investigate if mispricing in the stock market has an impact on firm-level investment. A significantly positive relation is documented between investment and the proxies for mispricing, suggesting that overpriced (underpriced) firms tend to overinvest (underinvest). Furthermore, we find that equity-dependent firms display a more pronounced sensitivity of investment to stock misvaluation than do nonequity-dependent firms. Taken together, our findings evidence that mispricing in Australian capital markets may have significant influence on the real economy, and the influence works though an equity-financing channel.
Original language | English |
---|---|
Pages (from-to) | 388-408 |
Number of pages | 21 |
Journal | Pacific Basin Finance Journal |
Volume | 15 |
Issue number | 4 |
DOIs | |
Publication status | Published - 1 Sept 2007 |
Externally published | Yes |
Keywords
- Australian firms
- Equity dependence
- Investment
- Investment-Q sensitivity
- Market inefficiency
ASJC Scopus subject areas
- Finance
- Economics and Econometrics