Strategic Deviation and Stock Return Synchronicity

We examine the effect of strategic deviation on the relative amount of firm-specific information incorporated into stock prices, measured by stock return synchronicity. Strategic deviation is conceptualized as the extent to which the pattern of a firm’s resource allocation deviates from that of its industry peers. We find that strategic deviation is negatively associated with stock return synchronicity. Using a path analysis, we document that firms following deviant strategy issue more frequent managerial forecasts and have a higher level of block ownership than nondeviant firms, and that both managerial forecasts and block ownership partially mediate the relationship between strategic deviation and stock return synchronicity. Our study contributes to accounting and finance literature by documenting the role of firms’ strategic positioning in the stock price-formation process.