Does the Market Matter for More than Investment?

29 Pages Posted: 21 Mar 2006 Last revised: 7 Nov 2013

Date Written: August 2, 2013


Market effects on corporate investment are well documented. Low disagreement implies high investment, but we know little about what high disagreement implies, other than the implied flip side (low investment). This paper adds to this literature in several ways. A new dimension of corporate behavior that is related to disagreement is documented. Higher disagreement precedes a lower cost structure. Empirical tests reveal that the results are not driven by forced production efficiency due to financial constraints.

Keywords: divergent beliefs, corporate finance, corporate governance

Suggested Citation

Smith, Jason M., Does the Market Matter for More than Investment? (August 2, 2013). Journal of Empirical Finance, Forthcoming, Available at SSRN: or

Jason M. Smith (Contact Author)

Utah State University ( email )

Logan, UT 84322
United States

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