The Horizon of Investors' Information and Corporate Investment

Olivier Dessaint (1) , Thierry Foucault (2) , Laurent Frésard (3)

1 INSEAD - Institut Européen d'administration des Affaires
2 HEC Paris - Ecole des Hautes Etudes Commerciales
3 Swiss Finance Institute

We study how the quality of investors' information across horizons influences investment. In our theory, managers care about how investment is impounded in current stock prices. Because prices imperfectly reflect investment’s value, they under-invest. However, they under-invest less when investors have better information about the horizon matching that of their projects. Using a measure of projects' horizon obtained from the text of regulatory filings, we find that improvements in investors' long-term (short-term) information induce firms with long-term (short-term) projects to invest more, especially when managers focus on current stock prices. Therefore, the quality of investors' information across horizons has real effects.

Mots clés: Project Horizon; Short-termism; Information Quality; Forecasting horizon; Forecasts’ informativeness; Managerial Incentives

Domaines: Gestion et management

Olivier Dessaint, Thierry Foucault, Laurent Frésard. The Horizon of Investors' Information and Corporate Investment. 2022. ⟨hal-03890720⟩