Corporate Governance and Financial Peer Effects

Community and compensation: Director remuneration in Thailand

“…Peer effects have been found to influence headquarter locations and takeover defenses (John & Kadyrzhanova 2008), capital structure (Leary & Roberts, 2014), investments (Bursztyn et al, 2014), dividend policies (Grennan, 2019), and stock splits (Kaustia and Rantala, 2015). Fairhurst & Nam (2018) find that peer effects on capital structure are stronger for companies with weak corporate governance, which are less subject to capital market discipline.…”

Do peer firms influence innovation?

“…1 This change is occurring against a backdrop of rapid technological advancements and intensified product market competition, which has further incentivised firms to innovate. 2 While the extant literature identifies several determinants of R&D (see Aghion et al, 2013;Atanassov, 2015;He and Wintoki, 2016), it remains an empirical question whether or not the interplay of industry dynamics, more specifically, peer firms influence R&D. Yet, the literature relating to other corporate decisions, such as capital structure (Leary and Roberts, 2014;Kaustia and Rantala, 2015;Francis et al, 2016;Fairhurst and Nam, 2018), dividend policy (Adhikari and Agrawal, 2018;Grennan, 2019), cash holdings (Chen and Chang, 2012), and investment (Foucault and Frésard, 2014;Frésard and Valta, 2016;Frydman, 2015;Bustamante and Frésard, 2017), show that peer effects matter. Motivated by this growing literature, we examine whether and to what extent peer firms also influence innovation.…”

The peer contagion effects and firms' innovation: Evidence from China

“…According to the previous analysis, since innovation activities require significant long‐term investment of resources and a large amount of information cost, firms need to collect as much information as possible to evaluate innovation decisions and implement innovative behaviors, while obtaining peer information through various channels to ensure a competitive advantage in innovation strength. Some managers are generally characterized by limited rationality and risk aversion, and especially the less capable managers are under greater psychological pressure to face the capital‐intensive and long‐cycle innovation process, while the cost of searching for information about innovation is higher, and thus tend to choose the most conservative innovation strategy and follow the innovation behavior of peer firms (Fairhurst & Nam, 2018). According to the resource dependency theory, managers with higher competence use their high‐quality social network to bring time‐sensitive information and key resources to the firm, remove the complex and tedious information noise in the market, and reduce information asymmetry within the firm and between the industry and the market.…”

“…Mas and Moretti (2009) argues that in addition to factors such as firm size and profitability, competitors' compensation levels need to be included in the executive compensation function, and Albuquerque et al (2013) find significant peer contagion effects for corporate executive compensation. In addition, researchers have found peer contagion effects for corporate capital structure decisions (Fairhurst & Nam, 2018; Francis et al, 2016), investment decisions (Frésard & Valta, 2016), stock split decisions (Kaustia & Rantala, 2015), dividend policy (Grennan, 2019; Yan & Zhu, 2020), debt maturity structure (Duong et al, 2015), cash holding levels (Chen et al, 2019), and violations (Parsons et al, 2018).…”