The Effects of Fund Flows on Corporate Investment: A Catering View

56 Pages Posted: 11 Jun 2012 Last revised: 5 Jun 2018

See all articles by Nelson Camanho

Nelson Camanho

School of Economics and Finance, Queen Mary University of London

José Afonso Faias

Catholic University of Portugal (UCP)

Date Written: June 4, 2018

Abstract

We document a positive direct link between mutual fund flow-driven price pressure and future corporate investment. High price pressure firms with high investments have lower future stock returns and operational performance than high price pressure firms with low investments. Investment sensitivity to price pressure is stronger for firms with high churn rates (shorter horizon) and firms with high R&D intensity (with more opaque assets) and remains positive and significant for firms that are less financially constrained, suggesting there is a channel between stock price pressure and corporate investment that is independent of external financing.

Keywords: Mutual funds, Price pressure, Investment, Catering

JEL Classification: G12, G14, G23, G31

Suggested Citation

Camanho, Nelson and Faias, José, The Effects of Fund Flows on Corporate Investment: A Catering View (June 4, 2018). Available at SSRN: https://ssrn.com/abstract=2080904 or http://dx.doi.org/10.2139/ssrn.2080904

Nelson Camanho (Contact Author)

School of Economics and Finance, Queen Mary University of London ( email )

Mile End Road
London, London E1 4NS
United Kingdom

José Faias

Catholic University of Portugal (UCP) ( email )

Palma de Cima
Lisboa, 1649-023
Portugal

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