Peer Effects in Corporate Disclosure Decisions
72 Pages Posted: 2 May 2016 Last revised: 29 Oct 2020
Date Written: October 14, 2020
Abstract
This study examines peer effects in corporate disclosure decisions. Peer effects suggest that the average behavior of a group influences the behavior of individual group members. Consistent with peer effects, I find that disclosures made by industry peers induce firm disclosure. Peer effects in disclosure are more pronounced when a firm’s strategic uncertainty is higher, indicating that peer firm disclosure reduces the external uncertainty arising from the firm’s interaction with its industry peers and thus increases the precision of managerial private information. I also find that peer effects are stronger when a firm’s dependence on external financing is greater, suggesting that peer firm disclosure increases the costs on firm visibility and reputation in capital markets. Overall, these findings suggest that peer firm disclosure shapes a firm’s information environment.
Keywords: Peer effects, Disclosure, Management Forecast, 8-K Flings, and Press Releases
JEL Classification: M40, M41
Suggested Citation: Suggested Citation