Social Learning and Corporate Peer Effects

46 Pages Posted: 26 Mar 2012 Last revised: 4 Nov 2014

See all articles by Markku Kaustia

Markku Kaustia

Aalto University

Ville Rantala

University of Miami - Department of Finance

Date Written: October 28, 2014


We find that firms are more likely to split their stock if their peer firms have recently done so. The effect is comparable to an increase of 40-50% in the share price. Splitting probability is also increasing in the announcement returns of peer splits. These results are consistent with social learning from peers’ actions and outcomes. The unique features of the setting and various further tests render alternative explanations unlikely. We find no clear benefit in following successful peer splitters. Firms are sometimes suspected to succumb to imitation, and the effect we document may be a case in point.

Keywords: Peer effect, stock splits, social learning

JEL Classification: G19, G39

Suggested Citation

Kaustia, Markku and Rantala, Ville, Social Learning and Corporate Peer Effects (October 28, 2014). AFA 2013 San Diego Meetings Paper, Midwest Finance Association 2013 Annual Meeting Paper, Available at SSRN: or

Markku Kaustia (Contact Author)

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101

Ville Rantala

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

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