Social learning and corporate peer effects

Markku Kaustia, Ville Rantala

Research output: Contribution to journalArticle

18 Citations (Scopus)

Abstract

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 show could be a case in point.

Original languageEnglish (US)
Pages (from-to)653-669
Number of pages17
JournalJournal of Financial Economics
Volume117
Issue number3
DOIs
StatePublished - Sep 1 2015
Externally publishedYes

Fingerprint

Peer effects
Social learning
Peers
Announcement returns
Share prices
Stock splits
Imitation

Keywords

  • Peer effect
  • Social learning
  • Stock splits

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

Cite this

Social learning and corporate peer effects. / Kaustia, Markku; Rantala, Ville.

In: Journal of Financial Economics, Vol. 117, No. 3, 01.09.2015, p. 653-669.

Research output: Contribution to journalArticle

Kaustia, Markku ; Rantala, Ville. / Social learning and corporate peer effects. In: Journal of Financial Economics. 2015 ; Vol. 117, No. 3. pp. 653-669.
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