What Happens to Corporate Investment in Bad Times?
研究了经济衰退期间企业异常投资行为的变化，发现企业既减少过度投资也减少投资不足，且更强的治理机制会放大这种减少效应，对理解治理机制在不同时期的作用有帮助。
Recent studies suggest monitoring increases during economic downturns. In this study, we test whether firms’ abnormal investment activity changes across the business cycle. Focusing on recessions, we find that firms not only curtail overinvestment but also reduce underinvestment, with the combined effect representing a significant 9% of average investment. Employing various proxies for monitoring intensity, we demonstrate that stronger governance mechanisms are associated with more pronounced reductions in abnormal investment. Importantly, the influence of governance on abnormal investment is magnified during recessions relative to other periods. These results are robust to a wide array of control variables, methodologies, and potential endogeneity concerns. Our findings underscore the time-varying benefits of corporate monitoring and highlight the periods when governance mechanisms may be most effective. This paper was accepted by Bo Becker, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.04350 .