Abstract

http://ssrn.com/abstract=943439
 
 

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Importance of Catering Incentives for Growth Dynamics


Denys Glushkov


Wharton Research Data Services (WRDS), University of Pennsylvania

Katsiaryna Salavei Bardos


Fairfield University - Department of Finance

October 24, 2009

Journal of Behavioral Finance, Forthcoming

Abstract:     
This paper tests whether the dynamics of firm growth metrics, such as sales, investment growth, and changes in R&D and acquisitions, are more consistent with firms delivering growth when stock prices are more sensitive to growth related news (the catering channel) or with firms learning from stock prices about future growth prospects (the information channel). After developing “growth premium” measures, we document four main results consistent with catering theory: 1) time periods of high growth premium are followed by higher-than-expected growth indicators; 2) catering to the premium is more pronounced for firms whose managers care more about maximizing short-term stock price; 3) firms whose managers care more about short-term stock prices have higher time-series volatility of median sales, investment and PPE growth; 4) conditional trading strategy based on timing revenue growth premium yields 26 basis points per month after adjusting for risk and post-earnings announcement drift.

Number of Pages in PDF File: 56

Keywords: Catering, Revenue surprises, Growth, Market reactions

JEL Classification: G14, G35

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Date posted: November 11, 2006 ; Last revised: October 6, 2011

Suggested Citation

Glushkov, Denys and Bardos, Katsiaryna Salavei, Importance of Catering Incentives for Growth Dynamics (October 24, 2009). Journal of Behavioral Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=943439

Contact Information

Denys Glushkov (Contact Author)
Wharton Research Data Services (WRDS), University of Pennsylvania ( email )
WRDS The Wharton School
210 Vance Hall 3733 Spruce St.
Philadelphia, PA 19104
United States
(215) 5734166 (Phone)
HOME PAGE: http://ssrn.com/author=664253
Katsiaryna Salavei Bardos
Fairfield University - Department of Finance ( email )
Dolan School of Business
1073 North Benson Road
Fairfield, CT 06824
United States
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