Technology Rhetoric and Institutional Ownership

Andreou, Panayiotis C; Drivas, Kyriakos; Philip, Dennis; Wood, Geoffrey

Abstract

This paper compares actual R&D spend with the managerial rhetoric around technology and innovation contained within corporate disclosures of publicly-listed U.S. firms. We find that, whilst actual R&D spend and patents do not entice institutional investors to increase their stock holdings, firms that espouse technology and innovation in their corporate disclosures are quite successful in drawing in short-term investors. We frame this investor behavior within the economics of expectation literature. Whilst managers are incentivized to draw in capital, short-horizon investors are less likely to exert due diligence and are rather persuaded by a technology narrative−i.e., a "gold rush" effect. This explains our finding that when there is a sudden downturn with stock price crashes, short-term investors rush to withdraw their money from firms that talk tech. Our findings have implications for managerial rewards systems, especially when these encourage managerial hype.

Citation

Andreou, P. C., Drivas, K., Philip, D., & Wood, G. (online). Technology Rhetoric and Institutional Ownership. Cambridge Journal of Economics, https://doi.org/10.1093/cje/beae035

• Journal Article Type: Article
• Acceptance Date: Aug 10, 2024
• Online Publication Date: Nov 1, 2024
• Deposit Date: Sep 9, 2024
• Publicly Available Date: Nov 2, 2026
• Journal: Cambridge Journal of Economics
• Print ISSN: 0309-166X
• Electronic ISSN: 1464-3545
• Publisher: Oxford University Press
• Peer Reviewed: Peer Reviewed
• DOI: https://doi.org/10.1093/cje/beae035
• Keywords: Managerial narratives, technology, innovation, institutional ownership, short-termism, R&D, patents, speculative bubbles JEL Classification: G30; G32; D22; O30
• Public URL: https://durham-repository.worktribe.com/output/2852422