Journal ArticleDOI
Corporate Governance and Financial Peer Effects
Douglas J. Fairhurst,Yoonsoo Nam +1 more
TLDR
This article found that managers select financial policies partially by mimicking policies of peer firms, and that mimicking correlates to higher financing costs and lower future profitability, especially if it results in high leverage.Abstract:
Growing evidence suggests that managers select financial policies partially by mimicking policies of peer firms. We find that these peer effects in capital structure choice are unique to firms operating under weak external corporate governance. Cross‐sectional tests suggest that this finding is best explained by a quiet life hypothesis in which managers may be able to avoid the effort required to optimize financial policies and the scrutiny of market participants. Leverage ratios of mimicking firms display less sensitivity to a profitability shock. Finally, mimicking correlates to higher financing costs and lower future profitability, especially if it results in high leverage.read more
Citations
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Industry and geographic peer effects on corporate tax avoidance: Evidence from China
TL;DR: This paper examined industry and geographic peer effects on tax avoidance as well as their mechanisms and economic consequences in an emerging market, China using an instrumental variable approach and after considering a variety of robustness tests.
Journal ArticleDOI
Peer Influence on Trade Credit
TL;DR: In this article, the influence of peer firms on trade credit policies of listed firms in the United States was examined and it was shown that firms not only mimic peers in similar circumstances but also imitate their more and less successful peer firms.
Journal ArticleDOI
Do peer firms influence innovation
TL;DR: In this paper, a large sample of 4,545 US firms over the period 1968-2018 was used to find robust and significant positive peer effects on corporate innovation and showed that adopting peers' innovation policies is associated with improvements in long-term innovation outputs and product market performance.
Journal ArticleDOI
Is There Mimicking Behavior in Firms’ Trade Credit Decisions?
TL;DR: In this article, the authors investigated whether peer firms affect trade credit policy and found that peer effects in trade receivables only exist among suppliers that face fierce product market competition, consistent with the notion that firms closely mimic their peers due to competitive pressure.
Journal ArticleDOI
Network effects in corporate financial policies
TL;DR: In this paper, a spatial econometrics framework for estimating peer effects in capital structure is presented, which exploits the heterogeneous and intransitive nature of peer networks to identify economically informative structural coefficients.
References
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Journal ArticleDOI
On the pricing of corporate debt: the risk structure of interest rates
TL;DR: In this article, the American Finance Association Meeting, New York, December 1973, presented an abstract of a paper entitled "The Future of Finance: A Review of the State of the Art".
Journal ArticleDOI
Large Shareholders and Corporate Control
Andrei Shleifer,Robert W. Vishny +1 more
TL;DR: In this article, the authors explore a model in which the presence of a large minority shareholder provides a partial solution to the free-rider problem in a corporation with many small owners, where the corporation may not pay any one of them to monitor the performance of the management.
Journal ArticleDOI
Industry costs of equity
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this paper, the authors show that standard errors of more than 3.0% per year are typical for both the CAPM and the three-factor model of Fama and French (1993), and these large standard errors are the result of uncertainty about true factor risk premiums and imprecise estimates of the loadings of industries on the risk factors.
Posted Content
What Do We Know About Capital Structure? Some Evidence from International Data
Raghuram G. Rajan,Raghuram G. Rajan,Raghuram G. Rajan,Luigi Zingales,Luigi Zingales,Luigi Zingales +5 more
TL;DR: In this paper, the authors investigate the determinants of capital structure choice by analyzing the financing decisions of public firms in the major industrialized countries and find that factors identified by previous studies as important in determining the cross-section of the capital structure in the U.S. affect firm leverage in other countries as well.
Journal ArticleDOI
The Determinants of Capital Structure Choice
TL;DR: In this paper, the explanatory power of some of the recent theories of optimal capital structure is analyzed empirically and a factor-analytic technique is used to mitigate the measurement problems encountered when working with proxy variables.