Investigating the Relationship between Cash saving and Stock Price in formativeness in the Companies Listed on Bombay Stock Exchange

The present study aimed to evaluate the information content of stock prices and how managers use this information to make strategic decisions in various companies. Specifically, the study investigated whether managers use information content of corporate stock price to make decisions regarding cash holdings as well as capital expenditure or not? For this purpose, the required data was obtained from 85 companies listed in Bombay Stock Exchange during the 11-year period from 2007 to 2017. Multivariate regression with panel data was used to test the hypotheses. The results showed that the higher the information content of stock prices, the more sensitive the value of cash holdings and corporate capital expenditure to stock prices. In other words, managers more significantly use hidden information in stock price to make decisions about cash holdings and capital expenditures.