Growth Versus Margins: Destabilizing Consequences of Giving the Stock Market What it Wants

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Growth Versus Margins: Destabilizing Consequences of Giving the Stock Market What it Wants

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dc.contributor.author Stein, Jeremy
dc.contributor.author Aghion, Philippe
dc.date.accessioned 2010-02-19T14:17:17Z
dc.date.issued 2008
dc.identifier.citation Aghion, Philippe, and Jeremy C. Stein. 2008. Growth versus margins: Destabilizing consequences of giving the stock market what it wants. Journal of Finance 63, no. 3: 1025-1058. en_US
dc.identifier.issn 0022-1082 en_US
dc.identifier.uri http://nrs.harvard.edu/urn-3:HUL.InstRepos:3660730
dc.description.abstract We 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. en_US
dc.description.sponsorship Economics en_US
dc.language.iso en_US en_US
dc.publisher Blackwell Publishing en_US
dc.relation.isversionof http://dx.doi.org/10.1111/j.1540-6261.2008.01351.x en_US
dash.license LAA
dc.title Growth Versus Margins: Destabilizing Consequences of Giving the Stock Market What it Wants en_US
dc.relation.journal Journal of Finance en_US
dash.depositing.author Stein, Jeremy
dc.date.available 2010-02-19T14:17:17Z

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  • FAS Scholarly Articles [7470]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University

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