What Happens to Corporate Investment in Bad Times?

• 成果类型: Article; Early Access
• 署名作者: Amini, Shahram; Mackinlay, Andrew; Rountree, Brian; Weston, James
• 署名单位: University of Denver; Louisiana State University System; Louisiana State University; Rice University; Rice University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2024.04350
• 发表日期: 2025
• 关键词: recessions; overinvestment; Underinvestment; shareholder monitoring; MANAGERIAL ENTRENCHMENT; analyst coverage shock investor distraction

摘要

Recent studies suggest monitoring increases during economic downturns. In this study, we test whether firms' abnormal investment activity changes across the business cycle. Focusing on recessions, we find that firms not only curtail overinvestment but also reduce underinvestment, with the combined effect representing a significant 9% of average investment. Employing various proxies for monitoring intensity, we demonstrate that stronger governance mechanisms are associated with more pronounced reductions in abnormal investment. Importantly, the influence of governance on abnormal investment is magnified during recessions relative to other periods. These results are robust to a wide array of control variables, methodologies, and potential endogeneity concerns. Our findings underscore the time-varying benefits of corporate monitoring and highlight the periods when governance mechanisms may be most effective.