Ceo vs. Consumer Confidence: Investment, Financing, and Firm Performance
نویسندگان
چکیده
We examine the effect of aggregate measures of CEO and consumer confidence on firm financing and investment. We find that capital expenditure, merger activity, and financing activity all increase with CEO and consumer confidence. However, while CEO confidence positively predicts future sales growth and return on assets, consumer confidence is negatively related to these performance measures as well as equal-weighted stock returns. Our findings suggest irrationality manifests primarily on the investor side, with more rational/better informed CEOs using times of high consumer confidence to empire build. Corroborating this view, we observe that managers sell shares during periods of high consumer confidence.
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