Stock Returns, Industry Concentration and Firm Expenditure Decisions

Sivaprasad, S., Kamuriwo,S., Muradoglu,G. and Malki, I. 2024. Stock Returns, Industry Concentration and Firm Expenditure Decisions. Journal of Economics and Business.

TitleStock Returns, Industry Concentration and Firm Expenditure Decisions
TypeJournal article
AuthorsSivaprasad, S., Kamuriwo,S., Muradoglu,G. and Malki, I.
Abstract

We build on agency and strategy literature to investigate and explain whether and how changes in stock returns are related to critical managerial expenditure decisions by firms that are consistent and supportive of the firm’s strategy in different industry concentrations. Unlike previous work, our study considers the impact of an extended list of managerial expenditure decisions in the different industry concentration settings. Our research employs a rich panel of firms listed on the UK London Stock Exchange. We find strong support for our postulations. Key managerial expenditure decisions we considered, leverage, inventories turnover, R&D intensity, SGA and fixed asset additions have a differential impact depending on the industry concentration. Our findings add to our understanding of the effect of managerial agency and its integration to strategy on firm stock returns. Managerial expenditure decisions are both constrained by the competitive context as well as strategic logic – both of which impact stock returns. Our study helps managers to prioritize consequential expenditure decisions in different competitive contexts – a key resource for not only weathering crisis periods but optimizing returns to shareholders.

KeywordsIndustry Concentration
Leverage
Inventories
R&D
SGA
Fixed Asset Additions
Firm Value
JournalJournal of Economics and Business
ISSN0148-6195
1879-1735
Year2024
PublisherElsevier
Temple University
Accepted author manuscript
File Access Level
Open (open metadata and files)
Publisher's version
File Access Level
Open (open metadata and files)

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