Distracted Shareholders and Corporate Actions

Review of Financial Studies, Forthcoming

53 Pages Posted: 19 Nov 2013 Last revised: 15 Jul 2016

See all articles by Elisabeth Kempf

Elisabeth Kempf

University of Chicago - Booth School of Business

Alberto Manconi

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Oliver G. Spalt

University of Mannheim - Business School; European Corporate Governance Institute (ECGI)

Date Written: July 8, 2016

Abstract

Investor attention matters for corporate actions. Our new identification approach constructs firm-level shareholder "distraction" measures, by exploiting exogenous shocks to unrelated parts of institutional shareholders' portfolios. Firms with "distracted" shareholders are more likely to announce diversifying, value-destroying, acquisitions. They are also more likely to grant opportunistically-timed CEO stock options, more likely to cut dividends, and less likely to fire their CEO for bad performance. Firms with distracted shareholders have abnormally low stock returns. Combined, these patterns are consistent with a model in which the unrelated shock shifts investor attention, leading to a temporary loosening of monitoring constraints.

Keywords: Behavioral Corporate Finance, Investor Attention, Institutional Investors

JEL Classification: G23, G32, G34

Suggested Citation

Kempf, Elisabeth and Manconi, Alberto and Spalt, Oliver G., Distracted Shareholders and Corporate Actions (July 8, 2016). Review of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2356163 or http://dx.doi.org/10.2139/ssrn.2356163

Elisabeth Kempf (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://www.chicagobooth.edu/faculty/directory/k/elisabeth-kempf

Alberto Manconi

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://mypage.unibocconi.eu/albertomanconi/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Oliver G. Spalt

University of Mannheim - Business School ( email )

L5, 5
Mannheim, 68131
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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