The Role of Peer Effects in Corporate Employee Welfare Policies

Asad Ali Rind (), Saeed Akbar, Sabri Boubaker, Souad Lajili Jarjir () and Sabur Mollah
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Asad Ali Rind: School of Management [Bradford] - University of Bradford
Saeed Akbar: School of Management [Bradford] - University of Bradford
Souad Lajili Jarjir: IRG - Institut de Recherche en Gestion - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel
Sabur Mollah: Sheffield University Management School - University of Sheffield [Sheffield]

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Abstract: This paper investigates the role of peer effects in the employee welfare policies of organizations. Using US panel data for a sample of 11,451 firm-year observations from 1996 to 2017, we find that firms' employee welfare decisions are driven by their peers and show that peer firms play a significant role in defining corporate employee welfare policies. Our findings are robust to various sensitivity checks, including alternative definitions of employee welfare, alternative peer proxies and several identification strategies. Our additional analysis shows that herding behaviour is prevalent in followers, who mimic leaders'behaviour, but we do not find any such relationship for industry leaders. Further, we show evidence suggesting that mimetic and normative isomorphic pressures are driving the peer effects. Finally, we examine the economic consequences of peer mimicking in employee welfare policies and show that it improves focal firms' value and innovation. Our findings on firms' peer effects and herding behaviour have policy implications.

Date: 2021-05-19
Note: View the original document on HAL open archive server: https://hal.science/hal-03241471v1
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Citations: View citations in EconPapers (4)

Published in British Journal of Management, 2021, 33, pp.1609-1631. ⟨10.1111/1467-8551.12513⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03241471

DOI: 10.1111/1467-8551.12513

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