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Do Peer Firms Affect Corporate Financial Policy?

The Journal of finance (New York), 2014-02, Vol.69 (1), p.139-178 [Peer Reviewed Journal]

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Title:
Do Peer Firms Affect Corporate Financial Policy?
Author: LEARY, MARK T. ; ROBERTS, MICHAEL R.
Subjects: Business structures ; Capital structure ; Corporate finance ; Debt ; Decision analysis ; Decision theory ; Determinants ; Economic policy ; Equity ; Externalities ; Financial leverage ; Financial policy ; Industrial market ; Leverage ; Peer groups ; Peers ; Profitable firms ; Service industries ; Studies
Is Part Of: The Journal of finance (New York), 2014-02, Vol.69 (1), p.139-178
Description: We show that peer firms play an important role in determining corporate capital structures and financial policies. In large part, firms' financing decisions are responses to the financing decisions and, to a lesser extent, the characteristics of peer firms. These peer effects are more important for capital structure determination than most previously identified determinants. Furthermore, smaller, less successful firms are highly sensitive to their larger, more successful peers, but not vice versa. We also quantify the externalities generated by peer effects, which can amplify the impact of changes in exogenous determinants on leverage by over 70%.
Publisher: Cambridge: Blackwell Publishing Ltd
Language: English
Identifier: ISSN: 0022-1082
EISSN: 1540-6261
DOI: 10.1111/jofi.12094
CODEN: JLFIAN
Source: Alma/SFX Local Collection

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