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Corporate Governance and Firm OrganizationMicrofoundations and Structural Forms$
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Anna Grandori

Print publication date: 2004

Print ISBN-13: 9780199269761

Published to Oxford Scholarship Online: September 2007

DOI: 10.1093/acprof:oso/9780199269761.001.0001

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Information Intermediaries' Incentives and Corporate Strategy Choices in the US

Information Intermediaries' Incentives and Corporate Strategy Choices in the US

Chapter:
(p.113) 5 Information Intermediaries' Incentives and Corporate Strategy Choices in the US
Source:
Corporate Governance and Firm Organization
Author(s):

Patrick Moreton

Todd Zenger

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199269761.003.0006

This chapter criticizes and extends current shareholder value approaches to CG by highlighting the subjective features of share prices as ‘perceptions of value’, and testing the hypothesis that ‘financial analysts' capacity to influence stock prices induce managers to pursue strategies that analysts prefer, rather than strategies that maximize long-term discounted cash flows’. In substantive terms, this conformism effect is expected to drive managers' choices away from unfamiliar, unique, strategies that may better sustain competitive advantage, and towards more familiar ones. Empirical results do show a negative relationship between the uniqueness of a firm's strategy and the level of analyst coverage, but also indicate the need for further dynamic qualifications in terms of changes in uniqueness and changes in industry structures in altering the scope of analyst coverage.

Keywords:   shareholder value, stock prices, financial analysts, firm strategies, competitive advantage

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