Peer effects in financial economics: A literature survey

Asad Ali-Rind, Sabri Boubaker and Souad Lajili Jarjir ()
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Souad Lajili Jarjir: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine

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Abstract: The paper reviews the growing literature on peer effects in finance from theoretical and empirical viewpoints. In particular, we assess the importance of peer behavior on firms' financial policies, analyze the channels through which they operate, and gauge their magnitude. We particularly review empirical works on herding and peer effects in two subfields of finance: corporate finance and the financial markets. We also discuss the results of many relevant peer-reviewed academic studies and provide research and policy implications. The main conclusion is that peer effects are important in shaping investor and firm decisions. The most critical problem in the peer effect literature is employing an identification strategy to ensure that results are not driven by endogeneity. The paper also discusses ways to address this identification issue and provides a future research agenda.

Date: 2023-01
Note: View the original document on HAL open archive server: https://hal.science/hal-04085261v1
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Published in Research in International Business and Finance, 2023, 64, pp.101873. ⟨10.1016/j.ribaf.2022.101873⟩

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Journal Article: Peer effects in financial economics: A literature survey (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04085261

DOI: 10.1016/j.ribaf.2022.101873

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