Information Flows Among Rivals and Corporate Investment

56 Pages Posted: 17 Jun 2019 Last revised: 14 Jan 2020

See all articles by Darren Bernard

Darren Bernard

University of Washington - Department of Accounting

Terrence Blackburne

Oregon State University

Jacob R. Thornock

Brigham Young University

Date Written: August 4, 2019

Abstract

Using a novel pairwise measure of firms’ acquisition of rivals’ disclosures, we show that investment opportunities drive interfirm information flows. We find that these flows predict subsequent mergers and acquisitions as well as how and how much firms invest, relative to rivals. Moreover, firms’ use of rivals’ information often hinges on the similarities of their products. Our results suggest that rivals’ public information, far from being unusable, helps facilitate investment and product decisions, including acquisitions and product differentiation strategies. The findings also support a learning mechanism that could partly underlie the emerging literature on peer investment effects.

Keywords: information acquisition, information flows, rivalry, investment, M&A

JEL Classification: D83, D85, G30, G34, L22

Suggested Citation

Bernard, Darren and Blackburne, Terrence and Thornock, Jacob, Information Flows Among Rivals and Corporate Investment (August 4, 2019). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3400559 or http://dx.doi.org/10.2139/ssrn.3400559

Darren Bernard (Contact Author)

University of Washington - Department of Accounting ( email )

PACCAR Hall
4273 E Stevens Way NE
Seattle, WA 98195-3200
United States

Terrence Blackburne

Oregon State University ( email )

Corvallis, OR 97331
United States

Jacob Thornock

Brigham Young University ( email )

Provo, UT 84602
United States
8014220828 (Phone)

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