Social learning and corporate peer effects

Markku Kaustia and Ville Rantala

Journal of Financial Economics, 2015, vol. 117, issue 3, 653-669

Abstract: We find that firms are more likely to split their stock if their peer firms have recently done so. The effect is comparable to an increase of 40–50% in the share price. Splitting probability is also increasing in the announcement returns of peer splits. These results are consistent with social learning from peers’ actions and outcomes. The unique features of the setting and various further tests render alternative explanations unlikely. We find no clear benefit in following successful peer splitters. Firms are sometimes suspected to succumb to imitation, and the effect we show could be a case in point.

Keywords: Peer effect; Stock splits; Social learning (search for similar items in EconPapers)
JEL-codes: G19 G39 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (102)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:117:y:2015:i:3:p:653-669

DOI: 10.1016/j.jfineco.2015.06.006

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