Impact Of Changes In Strategic Investments On Shareholder Returns: The Role Of Growth Opportunities

We argue that a firm's growth opportunity may provide us with guidelines on whether increases or decreases in capital investments may contribute to that firm's returns to shareholders. We find consistent empirical support for "good" managerial decisions. That is, we find that increases in capital investments by firms with growth opportunities enhance their returns to shareholders. The results indicate that decreases in strategic investments increase the returns to shareholders of those firms lacking in growth opportunities. The findings, however, are not consonantally significant for "bad" managerial investment decisions - - decreases in investments by firms with growth opportunities or increases in investments by firms lacking in growth opportunities.