Equity Market Fragmentation and Capital Investment Efficiency

• 成果类型: Article
• 署名作者: Landsman, Wayne; Pan, Jing; Stubben, Stephen
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill; University of North Carolina School of Medicine; Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; Utah System of Higher Education; University of Utah
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4905
• 发表日期: 2024
• 页码: 4381-4406
• 关键词: equity market fragmentation; Capital investment

摘要

This study examines how equity market fragmentation affects firms' capital investment decisions. Recent empirical research finds that market fragmentation lowers trading costs and thus improves market quality. We examine whether this increase in market quality translates into greater revelatory price efficiency, where stock prices reveal with greater precision information to managers and/or creditors about firms' investment opportunities. Consistent with this notion, our findings reveal that the association between capital investment and investment opportunities is increasing in market fragmentation. Additional evidence suggests that (a) market fragmentation increases revelatory price efficiency at least in part by encouraging information acquisition and informed trade by equity investors and (b) the more efficient stock prices inform both managers and creditors about firms' investment opportunities. Inferences based on difference-in-differences and instrumental variable tests are consistent with those based on our primary findings.