An International Study of Peer Effects on Corporate Investments

60 Pages Posted: 10 Jan 2022 Last revised: 4 Feb 2022

See all articles by Michael Machokoto

Michael Machokoto

University of the Witwatersrand

Daniel Gyimah

University of Aberdeen

Abongeh A. Tunyi

The University of Sheffield

Date Written: January 8, 2022


Using a large sample of 17,747 firms from 44 countries, we find significant positive peer effects on corporate investment. Specifically, a firm increases its investments by 2% to 6% in response to a one standard deviation increase in peer firms' investments. Further analyses show significant within-country heterogeneity, as peer effects are salient for larger, mature, high-tangibility and high-market power firms with ample resources and latitude to respond to rival firms. In contrast, we find no significant cross-country heterogeneity in peer effects conditional on institutional quality, legal origin, and financial development, suggesting that peer effects similarly matter across countries. Our results further show that mimicking peer firms' investments positively affects shareholder value, with this effect being salient in good macroeconomic states. In summary, our study shows substantial industrial interdependence in corporate investments which might amplify positive and negative firm-specific shocks within and across industries and countries.

Keywords: Peer effects, capital expenditure, institutions, financial development, financial crisis, mimicking.

JEL Classification: C31, C32, D22

Suggested Citation

Machokoto, Michael and Gyimah, Daniel and Tunyi, Abongeh A., An International Study of Peer Effects on Corporate Investments (January 8, 2022). Available at SSRN: or

Michael Machokoto (Contact Author)

University of the Witwatersrand ( email )

School of Economics and Finance
1 Jan Smuts Ave, Braamfontein
Johannesburg, Gauteng 2000
South Africa

Daniel Gyimah

University of Aberdeen ( email )

Dunbar Street
Aberdeen, AB24 3QY
United Kingdom

Abongeh A. Tunyi

The University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

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