Managerial Learning from Decoding Noisy Stock Prices: New(s) Evidence

A long literature argues corporate managers learn from stock prices, but organizations’ learning process is challenging to observe. We present a novel test using firm-level readership of financial media articles as a manifestation of managerial learning. We hypothesize that reading financial media helps managers with the interpretation of noisy signals in stock prices. We show that the classic Q-sensitivity of R&D expenditure increases by 26% when firms’ reading of financial articles increases by one standard deviation. This relationship is mainly driven by reading from near the headquarters where managers are likely located and by articles likely more informative to managers.