Corporate Savings and Price Informativeness

Review of Finance, Forthcoming

37 Pages Posted: 9 Oct 2009 Last revised: 15 Mar 2012

See all articles by Laurent Frésard

Laurent Frésard

University of Lugano; Swiss Finance Institute

Date Written: January 1, 2011


This 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.

Keywords: Corporate Savings, Cash Holdings, Price Informativeness, Private Information, Managerial Learning

JEL Classification: G15, G34, G31

Suggested Citation

Frésard, Laurent, Corporate Savings and Price Informativeness (January 1, 2011). Review of Finance, Forthcoming, Available at SSRN:

Laurent Frésard (Contact Author)

University of Lugano ( email )

Lugano, 900

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

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