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 内容
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| Corporate Financing Decisions |
| When Investors Take the Path of Least Resistance |
| 作者：Baker, M., J. Coval, and J. Stein 访问次数： 更新日期：2007-8-12 10:16:42 来源：NBER |
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Corporate Financing Decisions When Investors Take the Path of Least Resistance
Malcolm Baker Harvard Business School and NBER
Joshua Coval Harvard Business School and NBER
Jeremy C. Stein Harvard Economics Department and NBER
We argue that inertial behavior on the part of investors can have significant consequences for corporate financial policy. One implication of investor inertia is that it improves the terms for the acquiring firm in a stock-for-stock merger, since acquirer shares are placed in the hands of investors, who, independent of their beliefs, do not resell these shares on the open market. In the presence of a downward-sloping demand curve, this leads to a reduction in price pressure, and hence to cheaper equity financing. We develop a simple model to illustrate this idea, and present supporting empirical evidence. Both individual and institutional investors tend to hang on to shares granted them in mergers, with this tendency being much stronger for individuals.Consistent with the model and with this cross-sectional pattern in inertia, acquirers targeting firms with high institutional ownership experience more negative announcement effects and greater announcement volume. Moreover, the results are strongest when the overlap in target and acquirer institutional ownership is low and when the demand curve for the acquirer’s shares appears to be steep.
Much of finance theory rests on the assumption that investors continuously monitor their portfolios and condition their investment decisions on the most recently available information.Even in models with transaction costs (e.g., Constantinides (1986)) or behavioral biases (e.g.,Barberis, Shleifer and Vishny (1998), Daniel, Hirshleifer and Subrahmanyam (1998), and Hong and Stein (1999)), where trade may not be continuous and updating may not be fully rational,investors still can be thought of as processing new information and re-evaluating the decision of whether or not to trade on a constant basis.While this assumption is convenient for modeling purposes, it is also unrealistic. A large body of existing evidence – which we add to below – suggests that people often behave in a way that might be characterized as inertial, or as taking the path of least resistance. Inertial behavior can arise from a variety of sources, including endowment effects (Thaler (1980), Kahneman,Knetsch and Thaler (1990, 1991)), a tendency to procrastinate in decision making (Akerlof(1991), O’Donoghue and Rabin (1999)), or the cognitive fixed costs associated with reevaluating and re-optimizing an existing portfolio.1
In this paper, we argue that investor inertia may exert a significant influence on financialmarket outcomes. Our particular focus is on the consequences of inertia for mergers, and the main idea can be illustrated with a simple example. Consider a firm A that intends to acquire another firm T via a stock-for-stock merger, and suppose that the following two conditions hold.
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