Evidence Of Investors Responses To Managerial Investment Decision-Making

Abstract

This paper investigates the stock price reaction of some pre-management buyout (MBO) investment decisions of managers. This paper finds that managers who engage in non-acquisition type investment expenditures (like plant expansions) in the pre-MBO period could lower the firms stock price. In addition, managers whose companies buy the assets or a stake in another firm give their company a positive stock price movement. Lastly, there is a statistically significant difference in stock price reaction depending on whether the investment expenditure is non-acquisition or acquisition.