The peer-firm effect on firm’s investment decisions

Park, Kwangho; Yang, Insun; Yang, Taeyong

doi:10.1016/j.najef.2017.03.001

Cited by 61 publications

(52 citation statements)

References 33 publications

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“…In, Foucault and Fresard (2014) study, managers in the U.S. firms are found to be following the industry peers while deciding their firm's investments decisions. Similarly, Park et al (2017), confirms the existence of peer effects among U.S. firms while making investment decisions. And, this effect is stronger among firms that are financially constrained.…”

Section: Literature Review Peer Effects In Financementioning

confidence: 59%

“…Mimicking peer firms' investment behavior help in maintaining the status quo in a competitive market. However, in another study, Park et al (2017), find peer effects in investment decisions vary with the level of competition among the U.S. firms. Since mimicking behavior is attributed to taking less risk and being collective.…”

Section: Industry Concentration and Peer Effectsmentioning

confidence: 92%

“…Peer effects literature uses a variety of terminologies for representing this phenomenon like herd behavior, mimicking, social interaction, and information cascade. Theoretically, peer effects fall under the domain of herd behavior model (Park, Yang, & Yang, 2017). In a seminal study, Banerjee (1992) defines herd behavior as doing what everyone else is doing even when one's private information suggests doing something different.…”

Section: Peer Effects -Theory and Motivesmentioning

confidence: 99%

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Peer effects, Financial Decisions and Industry Concentration

Zaighum

Karim

2019

SJOM

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Purpose- This article reviews literature related to peer effects and different financial decisions. It further summarizes the theory and motives that drive peer effects. Also, the study highlights the influence of industry concentration on peer interaction in financial decision making. This content analysis of scantily available peer effect literature has been performed to highlight the significance of peer effects in financial decision making like investment, cash holding, leverage and many more. Most of the existing peer effects literature focuses on the U.S. However, peer effects also occur in other countries but empirical evidence is comparatively limited. But, managers may take into consideration their industry peers especially if their firms are operating in highly competitive environments. Design/Methodology- Content analysis approach is applied to review prevailing financial literature on peer interactions and financial decisions with a special focus on industry concentration in explaining the peer effects. Practical Implications- As the prime focus of managerial decisions is to maximize the firm’s value. Hence, information about peers would be helpful in making better decisions, especially in highly competitive environments. Also, this review of selected literature provides pathways for future research in investigating the motives of peer effects.

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Section: Literature Review Peer Effects In Financementioning

confidence: 59%

Section: Industry Concentration and Peer Effectsmentioning

confidence: 92%

Section: Peer Effects -Theory and Motivesmentioning

confidence: 99%

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Peer effects, Financial Decisions and Industry Concentration

Zaighum

Karim

2019

SJOM

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“…For future research, it would be interesting to advance the question of how peer firms' information impacts corporate investments. This type of investigation can be observed in Park, Yang, and Yang (2017) and Mama (2017). Other relevant issues relate\ to the payment of dividends (Adhikari & Agrawal, 2018), earnings management (Du & Shen, 2018), and cost of capital (Shroff, Verdi, & Yost, 2017), among others.…”

Section: Discussionmentioning

confidence: 99%

Investment Cash Flow Sensitivity and Tobin’s Q: The Case of Advanced Emerging Markets in Latin America

Figlioli¹,

Lima²

2020

IBR

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This paper examines whether the capital market and the internal generation of cash flows bring relevant information to decisions on corporate investments. For this investigation, we used data from 255 companies located in four Latin American (LA) countries: Brazil, Chile, Mexico and Peru (BCMP countries). The analysis period is from 2000 to 2017. The results indicate that cash flow represents one of the main drivers of corporate investments. In contrast, there were no indications that the capital market translates into a mechanism for transmitting useful information to firm managers about investments. Other drivers of value identified are associated with sales, cash and cash equivalents, and asset tangibility.

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“…Hence, the peer firms' stock return as well as its financial status take on a significant role in the stock return of firm i and the possible changes it may suffer. Leary and Roberts (2014), Francis et al (2016) and Park et al (2017) suggest that the imitation behavior from the peer's decision has an impact on the firm's financial decision. Our results seem to align with these results, and, in contrast, we believe this is also the result of the co-movement as suggested by Barberis et al (2005), since the dependence can be originated by an investor arranging the stocks into categories based on characteristics.…”

Section: Peer Effects From the Stock Returns And The Instrumental Varmentioning

confidence: 99%

The peer effects in asset price models: evidences from emerging and developed countries

Selan¹

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The peer-firm effect on firm’s investment decisions

Cited by 61 publications

References 33 publications

Peer effects, Financial Decisions and Industry Concentration

Peer effects, Financial Decisions and Industry Concentration

Investment Cash Flow Sensitivity and Tobin’s Q: The Case of Advanced Emerging Markets in Latin America

The peer effects in asset price models: evidences from emerging and developed countries

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