A Project-Level Analysis of Value Creation in Firms

44 Pages Posted: 17 Apr 2018

See all articles by Jonathan B. Cohn

Jonathan B. Cohn

University of Texas at Austin

Umit Gurun

University of Texas at Dallas

Rabih Moussawi

Villanova University - Department of Finance; University of Pennsylvania - The Wharton School

Date Written: March 30, 2018

Abstract

This paper analyzes value-creation in firms at the project level. We present evidence that managers facing short-termist incentives set a lower threshold for accepting projects. Using novel data on new client and product announcements in both the U.S. and international markets, we find that the market responds less positively to a new project announcement when the firm’s managers have incentives to focus on short-term stock price performance. Furthermore, textual analysis of project announcements show that firms with short-termist CEOs use more vague and generically positive language when introducing new projects to the marketplace.

Keywords: CEO Short-Termism, Corporate Investment, CEO Compensation, Career Concerns

JEL Classification: G31, G34, M12, M52

Suggested Citation

Cohn, Jonathan B. and Gurun, Umit and Moussawi, Rabih, A Project-Level Analysis of Value Creation in Firms (March 30, 2018). Available at SSRN: https://ssrn.com/abstract=3154203 or http://dx.doi.org/10.2139/ssrn.3154203

Jonathan B. Cohn

University of Texas at Austin ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-6827 (Phone)

Umit Gurun (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

HOME PAGE: http://www.umitgurun.com

Rabih Moussawi

Villanova University - Department of Finance ( email )

800 E Lancaster Ave
Bartley Hall, 2051
Villanova, PA 19085
United States

HOME PAGE: http://www.homepage.villanova.edu/rabih.moussawi

University of Pennsylvania - The Wharton School ( email )

United States

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