Peers’ performance and sensitivity of investment to peers’ stock price: Examining the moderating role of CEO overconfidence

Rong Gong

Journal of Business Research, 2025, vol. 186, issue C

Abstract: This study explores how firms adjust their investment based on their peers’ stock prices. I theorize that peer firms with superior performance are more influential on focal firms, which makes firms’ investments more sensitive to the stock prices of good-performing peer firms than to the stock prices of poor-performing peer firms. Meanwhile, overconfident CEOs are more likely to choose firms with better performance as their peer firms and adjust their investments based on the stock prices of good-performing peers. The empirical results show that a firm’s investments are more responsive to the stock prices of good-performing peers than to those of poor-performing peers, particularly among firms with overconfident CEOs. The results suggest that CEO overconfidence affects peer group selection.

Keywords: Peers; Investment; Learning from stock price; CEO overconfidence; Selection of peers (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:186:y:2025:i:c:s0148296324004521

DOI: 10.1016/j.jbusres.2024.114948

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