Corporate capital expenditure decisions and the market value of the firm

John J. McConnell, Chris J. Muscarella

Research output: Contribution to journalArticlepeer-review

385 Scopus citations

Abstract

This paper is an 'event-time' study of the common stock prices of a sample of 658 corporations around the dates on which they publicly announced their future capital expenditure plans. For industrial firms, announcements of increases (decreases) in planned capital expenditures are associated with significant positive (negative) excess stock returns. For public utility firm, neither increases nor decreases in planned capital expenditures are associated with significant excess stock returns. We interpret the evidence as being consistent with the hypothesis that managers seek to maximize the market value of the firm in making their corporate capital expenditure decisions.

Original languageEnglish (US)
Pages (from-to)399-422
Number of pages24
JournalJournal of Financial Economics
Volume14
Issue number3
DOIs
StatePublished - Jan 1 1985

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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