EconPapers    
Economics at your fingertips  
 

How does economic policy uncertainty influence managers' learning from peers' stock prices? Evidence from China

Xieyang Shen, Sijie Yang, Yulin Chen and Jianyu Zeng

Pacific-Basin Finance Journal, 2022, vol. 74, issue C

Abstract: This paper investigates the impact of economic policy uncertainty (EPU) on firms' investment sensitivity to their peers' stock prices. We find that investment increasingly responds to the variation of peers' prices during the high policy uncertainty period in China. To deal with the increasing uncertainty, managers need more information for investment decisions and thus are motivated to learn from the prices of their peer firms. Empirical evidence shows that the positive effect is more pronounced for firms with higher operating uncertainty, lower price informativeness, and limited access to economic policy, which supports our managerial learning hypothesis. Further discussions suggest that when EPU is heightened, the relationship between firms' investment and peers' prices is more significant for better-governed, less financially constrained, and more policy uncertainty exposed firms. And the investment of followers is sensitive to leaders' prices, but not vice versa. We also document investment influenced by peer learning is conductive to firm value in high EPU periods. Our study highlights the importance of policy uncertainty in explaining managers' incentives to learn from peer firms.

Keywords: Economic policy uncertainty; Managerial learning; Peer effects; Investment policy (search for similar items in EconPapers)
JEL-codes: D81 D83 G31 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X22000993
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:74:y:2022:i:c:s0927538x22000993

DOI: 10.1016/j.pacfin.2022.101804

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2022-11-19
Handle: RePEc:eee:pacfin:v:74:y:2022:i:c:s0927538x22000993