Corporate Strategy, Conformism, and the Stock Market

56 Pages Posted: 2 Feb 2016

See all articles by Thierry Foucault

Thierry Foucault

HEC Paris - Finance Department

Laurent Frésard

Universita della Svizzera italiana (USI Lugano); Swiss Finance Institute

Multiple version iconThere are 3 versions of this paper

Date Written: January 2016


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

JEL Classification: D21, D83, G31

Suggested Citation

Foucault, Thierry and Frésard, Laurent, Corporate Strategy, Conformism, and the Stock Market (January 2016). CEPR Discussion Paper No. DP11073, Available at SSRN:

Thierry Foucault (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
(33)139679569 (Phone)
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Laurent Frésard

Universita della Svizzera italiana (USI Lugano) ( email )

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

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