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The Valuation Effects Of Corporate Investment Decisions: Evidence From Domestic And Foreign Plant Announcements, Bum Suk Kim

Theses and Dissertations in Business Administration

This study examines the effects of corporate investment decisions--announcements of plants--on the value of the firm, using event-study methodology. This paper consists of two parts. Essay I discusses the valuation effects of domestic investments, while Essay II analyses the valuation effects of foreign investments undertaken by U.S. firms and compares the valuation effects between the two investments. Specifically, this study examines the validity of the overinvestment hypothesis and whether focus-increasing investments enhance the value of the firm.

First, the evidence shows that the valuation effects of the investment decision depend on the firm's investment opportunities, proxied by Tobin's q. That …