Corporate Strategy, Conformism, and the Stock Market

Thierry Foucault and Frésard, Laurent

No 11073, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We show that managers can raise firm value by imitating other public firms' strategies because imitation enhances their ability to obtain information from their own stock price or their peers' stock prices, which improves the efficiency of their investment decisions. This conformity effect is stronger for private firms' managers because they can learn information from stock prices only if they imitate public firms' strategies. In line with this prediction, we observe empirically that firms differentiate more after going public and that this pattern is stronger for firms with better informed managers or whose peers have less informative stock prices.

Keywords: Managerial learning; Peers; Product differentiation; Stock price informativeness (search for similar items in EconPapers)
JEL-codes: D21 D83 G31 (search for similar items in EconPapers)
Date: 2016-01
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://cepr.org/publications/DP11073 (application/pdf)

Related works:
Journal Article: Corporate Strategy, Conformism, and the Stock Market (2019)
Working Paper: Corporate Strategy, Conformism, and the Stock Market (2018)
Working Paper: Corporate Strategy, Conformism, and the Stock Market (2015)
Working Paper: Corporate Strategy, Conformism, and the Stock Market (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:11073

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP11073

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().