Product Market Uniqueness and Stock Market Valuations
University of Maryland - Department of Finance
Gordon M. Phillips
University of Southern California; National Bureau of Economic Research (NBER)
January 21, 2014
We examine whether stock market valuations of different firm organizational forms reflect firm uniqueness relative to industry peers. We measure uniqueness relative to peer-firm replicas of each firm constructed from firm 10-K product descriptions and accounting data. We find that firms have higher stock market valuations than matched industry peer firms when their firm product portfolios are more unique. This result holds for both conglomerate and focused single-segment organizational forms. Increased success in patenting, increased branding, and less venture capital financed entry into the firm's product space all contribute to the long-term maintenance of uniqueness and thus higher valuations. Overall, our findings show that the stock market values firm uniqueness and recognizes peer groups based on fundamental product characteristics that are not reflected in standard peer groupings.
Number of Pages in PDF File: 49working papers series
Date posted: October 13, 2012 ; Last revised: January 22, 2014
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