Market feedback, investment constraints and managerial behavior

P. Hill, D.J. Hillier

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)


This paper examines the joint role of market feedback and investment constraints on managerial behavior. Using a sample of UK fixed price initial public offerings, we show that underperformance of share returns at the IPO significantly affects managerial investment decisions in the period after the offering. Firms with better investment opportunities and proportionately lower fixed (higher intangible) assets are more sensitive to negative market feedback. Over the longer term, the more responsive firms perform significantly better than their non-responsive counterparts. The findings contribute to the debate on the informational advantage of managers over investors and present strong evidence that the market, on aggregate, can provide a superior assessment of a firm's opportunities. Managers who are able to respond to negative market feedback can significantly improve their firm's future prospects.
Original languageEnglish
Pages (from-to)584-605
Number of pages22
JournalEuropean Financial Management
Issue number3
Publication statusPublished - 1 Jun 2009


  • market feedback
  • managerial behavior
  • investment
  • financing
  • book to market
  • initial public offerings


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