The impact of stock price informativeness on firm-level investment - Evidence from Japan

Abstract

Stock price informativeness provides important market signals to both insiders and outside investors. Corporate managers extract and use information from the equity market for their firms’ activities including investment activities. Prior studies conduct a lot of empirical tests on the effect of the stock market on firm activities, yet the findings are not consistent across the countries. This paper intends to provide additional evidence on the effect of stock price informativeness on firm-level investment for a sample of Japanese non-financial listed firms over the period between 1988 to 2017 and finds that stock price informativeness increases firm-level investment in Japan and its impact is different across institutional shareholders. Keywords: Firm investment, stock price informativeness, price non-synchronicity, Japan.