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When Does the Peer Information Environment Matter?

68 Pages Posted: 27 Mar 2017 Last revised: 3 Dec 2017

Nemit Shroff

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Rodrigo S. Verdi

Massachusetts Institute of Technology (MIT)

Benjamin P. Yost

Boston College - Carroll School of Management

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Date Written: November 1, 2017

Abstract

This paper examines whether and when the information environment of peer firms in an industry affects the cost of capital for other firms in the industry. We predict and find that the peer information environment is negatively associated with a firm’s cost of capital when there is less publicly available firm-specific information and this negative association shrinks as the amount of firm-specific information increases. This paper provides evidence that information about peer-firms has externalities on the cost of capital for related firms and that these externalities are time-varying.

Keywords: Peer effects, Externalities, Disclosure, Cost of capital, Information asymmetry, IPOs, SEOs, Bonds, Dynamic effects

JEL Classification: D8; D62; G18; G31; G38; M4

Suggested Citation

Shroff, Nemit and Verdi, Rodrigo S. and Yost, Benjamin P., When Does the Peer Information Environment Matter? (November 1, 2017). Journal of Accounting & Economics (JAE), Vol. 64, No. 2–3, pp. 183-214, November 2017. Available at SSRN: https://ssrn.com/abstract=2941465

Nemit Shroff (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main St.
E62-679
Cambridge, MA MA 02142
United States
6173240805 (Phone)

HOME PAGE: http://mitsloan.mit.edu/faculty/detail.php?in_spseqno=51407&co_list=F

Rodrigo Verdi

Massachusetts Institute of Technology (MIT) ( email )

Sloan School of Management
100 Main Street E62-666
Cambridge, MA 02142
United States
(617) 253 2956 (Phone)

Benjamin Yost

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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