Growth versus Margins: Destabilizing Consequences of Giving the Stock Market What It Wants
AbstractWe develop a model in which a firm can devote effort either to increasing sales growth, or to improving per-unit profit margins. If the firm's manager cares about the current stock price, she will favor the growth strategy when the market pays more attention to growth numbers. Conversely, it can be rational for the market to weight growth measures more heavily when it is known that the firm is following a growth strategy. This two-way feedback between firms' strategies and the market's pricing rule can lead to excess volatility in real variables, even absent any external shocks. Copyright (c) 2008 by The American Finance Association.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by American Finance Association in its journal The Journal of Finance.
Volume (Year): 63 (2008)
Issue (Month): 3 (06)
Other versions of this item:
- Stein, Jeremy & Aghion, Philippe, 2008. "Growth Versus Margins: Destabilizing Consequences of Giving the Stock Market What it Wants," Scholarly Articles 3660730, Harvard University Department of Economics.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Massa, Massimo & Zhang, Lei, 2009. "Cosmetic mergers: The effect of style investing on the market for corporate control," Journal of Financial Economics, Elsevier, vol. 93(3), pages 400-427, September.
- Emre Ozdenoren & Kathy Yuan, 2012.
"Stock Market Tournaments,"
FMG Discussion Papers
dp706, Financial Markets Group.
- Ozdenoren, Emre & Yuan, Kathy, 2012. "Stock Market Tournaments," CEPR Discussion Papers 9000, C.E.P.R. Discussion Papers.
- Emre Ozdenoren & Kathy Yuan, 2012. "Stock Market Tournaments," KoÃ§ University-TUSIAD Economic Research Forum Working Papers 1222, Koc University-TUSIAD Economic Research Forum.
- David Berger, 2012. "Countercyclical Restructuring and Jobless Recoveries," 2012 Meeting Papers 1179, Society for Economic Dynamics.
- Demir, Firat & Caglayan, Mustafa, 2012. "Firm Productivity, Exchange Rate Movements, Sources of Finance and Export Orientation," MPRA Paper 37397, University Library of Munich, Germany.
- Pierre Chaigneau, 2012. "The Optimal Timing of CEO Compensation," Cahiers de recherche 1207, CIRPEE.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.