Peer Effects on Investment Decisions: Do Industry Leaders and Young Firms Behave Differently?

Abdul Rashid and Ayanle Farah Said

Global Business Review, 2024, vol. 25, issue 3, 791-811

Abstract: This study examines the influence of peer firms on a firm’s investment policy in Pakistan during the period 2001–2017. It also investigates the heterogeneity in peer effects by taking into account a firm’s age and its leadership role in the industry. The system-GMM estimation results suggest that peer firms significantly influence a firm’s investments on both tangible and intangible assets. Yet, peer effects are more pronounced for tangible investment. We also observe that young firms are more prone to imitate the investment decisions of their industry peers. However, the findings indicate that mimicking is not a tactical behaviour for industry leader firms. These findings have important implications for both the firm management and the owner community.

Keywords: Corporate investments; peer effects; managerial learning; industry leaders; young firms (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:sae:globus:v:25:y:2024:i:3:p:791-811

DOI: 10.1177/0972150921993674

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