A Project-Level Analysis of Value Creation in Firms
44 Pages Posted: 17 Apr 2018
Date Written: March 30, 2018
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
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