Growth vs. margins
Subtitle: destabilizing consequences of giving the stock market what it wants
By: Philippe Aghion, Jeremy C. Stein.
Contributors: Stein, Jeremy C.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10999; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10999.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We develop a multi-tasking model in which a firm can devote its efforts either to increasing sales growth, or to improving per-unit profit margins by, e.g., cutting costs.  If the firm%u2019s manager is concerned with the current stock price, she will tend to favor the growth strategy at those times when the stock market is paying more attention to performance on the growth dimension.  Conversely, it can be rational for the stock market to weight observed growth measures more heavily when it is known that the firm is following a growth strategy.  This two-way feedback between firms%u2019 business strategies and the market%u2019s pricing rule can lead to purely intrinsic fluctuations in sales and output, creating excess volatility in these real variables even in the absence of any external source of shocks"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 1/3/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.