Corporate Strategy, Conformism, and the Stock Market - Archive ouverte HAL Access content directly
Preprints, Working Papers, ... Year :

Corporate Strategy, Conformism, and the Stock Market

(1) ,
1
Laurent Frrsard
  • Function : Author

Abstract

We show that product differentiation reduces the informativeness of a firm's stock price (or its peers' stock prices) about the value of its growth opportunities. This results in less efficient exercise of a firm's growth options when managers rely on information in stock prices for their decisions. This informational cost of differentiation induces conformity in product market strategies and is larger for private firms. Hence, a firm should differentiate more after going public. We confirm this prediction empirically and show that the post-IPO increase in differentiation is stronger for firms with better informed managers or less informative peers' stock prices.
Not file

Dates and versions

hal-02002755 , version 1 (31-01-2019)

Licence

Copyright

Identifiers

  • HAL Id : hal-02002755 , version 1

Cite

Thierry Foucault, Laurent Frrsard. Corporate Strategy, Conformism, and the Stock Market. 2015. ⟨hal-02002755⟩
33 View
0 Download

Share

Gmail Facebook Twitter LinkedIn More