A Research on Time Difference by which Corporate Financial Policies are Reflected on Stock Prices

We try to investigate time difference by which financial policies are reflected on stock prices in Korean Stock Market. We document that firms with larger foreign share invest more, and are more highly appreciated in the market. Our sample suggests no relationship between share concentration and types of investment. Chaebol affiliated firms are likely to invest more on physical assets and human resources. Chaebol affiliated firms, however, seems to invest less on R&D activities. Foreign investors appear to prefer to invest on chaebol affiliated firms. Multivariate regression supports that different types of corporate investment have different time lags of reaction in the market - advertisement, immediately; capital expenditures, for two years; and R&D, after a year and for four years. Investment on human resources shows market valuation effect only contemporaneously. But the hypothesized ordering of market response is only partly supported. Finally, governance variables have been observed to have only limited effect on the valuation of corporate investment activities.