When Does the Peer Information Environment Matter?
68 Pages Posted: 27 Mar 2017 Last revised: 3 Dec 2017
Date Written: November 1, 2017
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: Suggested Citation