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  • May 2017
  • Article
  • Review of Financial Studies

Distracted Shareholders and Corporate Actions

By: Elisabeth Kempf, Alberto Manconi and Oliver Spalt
  • Format:Electronic
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Abstract

Investor attention matters for corporate actions. Our new identification approach constructs firm-level shareholder "distraction" measures, by exploiting exogenous shocks to unrelated parts of institutional shareholders' portfolios. Firms with "distracted" shareholders are more likely to announce diversifying, value-destroying, acquisitions. They are also more likely to grant opportunistically-timed CEO stock options, more likely to cut dividends, and less likely to fire their CEO for bad performance. Firms with distracted shareholders have abnormally low stock returns. Combined, these patterns are consistent with a model in which the unrelated shock shifts investor attention, leading to a temporary loosening of monitoring constraints.

Keywords

Investors; Business and Shareholder Relations; Executive Compensation; Stocks; Mergers and Acquisitions

Citation

Kempf, Elisabeth, Alberto Manconi, and Oliver Spalt. "Distracted Shareholders and Corporate Actions." Review of Financial Studies 30, no. 5 (May 2017): 1660–1695.

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About The Author

Elisabeth Kempf

Finance
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More from the Authors
  • Attracting the Sharks: Corporate Innovation and Securities Class Action Lawsuits By: Elisabeth Kempf and Oliver Spalt
  • Political Ideology and International Capital Allocation By: Elisabeth Kempf, Mancy Luo, Larissa Schäfer and Margarita Tsoutsoura
  • The Political Polarization of Corporate America By: Vyacheslav Fos, Elisabeth Kempf and Margarita Tsoutsoura
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