A Project-Level Analysis of Value Creation in Firms
Jonathan B. Cohn
University of Texas at Austin
Umit G. Gurun
University of Texas at Dallas - Naveen Jindal School of Management
University of Pennsylvania - The Wharton School
November 17, 2011
AFA 2013 San Diego Meetings Paper
This paper analyzes value-creation in firms at the project level. Our analysis of new client and product announcements indicates that the stock market conditions its response to new project announcements on the nature of CEO incentives within the firm. Announcement returns are positively related to CEO pay-performance sensitivity and have an inverse u-shaped relationship with CEO age, consistent with both career concerns and older managers facing compressed time horizons. We do not find that corporate governance variables predict project announcement returns. We also show that firms are likely to time their project announcements so as to avoid announcing projects at times when investors are likely to be distracted by other firm news.
Number of Pages in PDF File: 25
Keywords: Investment, CEO Compensation, Career Concerns, Corporate Governance, Voluntary Disclosure
JEL Classification: G14, G31, G32working papers series
Date posted: January 19, 2012 ; Last revised: March 18, 2012
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