Economics and Finance Faculty Publications and Presentations
Document Type
Article
Publication Date
2-2018
Abstract
Using a large sample of US public companies, we find robust evidence that firms’ payout policies, i.e., dividends and share repurchases, are significantly influenced by the policies of their industry peers. To overcome endogeneity problems, we employ instrumental variable techniques based on peers’ stock price shocks. Peer influence on payouts is more pronounced among firms that face greater product market competition and operate in better information environments. With regards to dividends, firms, especially smaller and younger firms, are more sensitive to industry peers that are similar to them in size and age. However, mimicking repurchases is concentrated among large and mature firms only. Peer influence on dividends, compared to repurchases, seems more stable across firm and industry conditions. Overall, peer influence on dividends, and, to a less extent, on repurchases, is consistent with a rivalry-based theory of imitation, which posits that firms imitate peers’ actions to maintain their competitive parity.
Recommended Citation
Adhikari, Binay K., and Anup Agrawal. “Peer Influence on Payout Policies.” Journal of Corporate Finance 48 (February 1, 2018): 615–37. https://doi.org/10.1016/j.jcorpfin.2017.12.010.
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
First Page
615
Last Page
637
Publication Title
Journal of Corporate Finance
DOI
10.1016/j.jcorpfin.2017.12.010
Comments
© 2017 Elsevier B.V. Original published version available at https://doi.org/10.1016/j.jcorpfin.2017.12.010