Corporate Strategy, Conformism, and the Stock Market

Thierry Foucault and Frésard, Laurent

No 11073, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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
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Citations: View citations in EconPapers (3)

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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)
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