Information flows among rivals and corporate investment

Darren Bernard, Terrence Blackburne and Jacob Thornock

Journal of Financial Economics, 2020, vol. 136, issue 3, 760-779

Abstract: Using a novel pairwise measure of firms’ acquisition of rivals’ disclosures, we show that investment opportunities drive interfirm information flows. We find that these flows predict subsequent mergers and acquisitions as well as how and how much firms invest, relative to rivals. Moreover, firms’ use of rivals’ information often hinges on the similarities of their products. Our results suggest that rivals’ public information, far from being unusable, helps facilitate investment and product decisions, including acquisitions and product differentiation strategies. The findings also support a learning mechanism that could partly underlie the emerging literature on peer investment effects.

Keywords: Information acquisition; Information flows; Rivalry; Investment; M&A (search for similar items in EconPapers)
JEL-codes: D83 D85 G30 G34 L22 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:136:y:2020:i:3:p:760-779

DOI: 10.1016/j.jfineco.2019.11.008

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