Conclusion
It is common for corporations to interact with peer firms in decision-making, through actions such as signing strategic cooperating agreements and developing marketing strategies. Recent studies examine whether the characteristics or behavior of peer firms affects corporate capital structure (Leary and Roberts, 2014), mergers and acquisitions (Bizjak et al., 2009) and tax avoidance (Li et al., 2014). Investment decisions are important and determine corporate development. Most studies examining the peer effect in corporate investment hold that managers can gain useful information from the stock price of peer firms. Edmans et al. (2012a, 2012b) and Bond et al. (2012) point out that stock prices contain useful information that is helpful in guiding a firm’s investment policy, such as industry growth opportunities, external environment, strategy of competitors and consumer demands. Valuing the stock price of peer firms can capture useful information, which can reduce investment uncertainty. However, few studies examine the direct effect of peer firms’ investment behavior on the firm’s investment policy. The aim of this study was therefore to identify whether, how, and why peer firm behavior matters for corporate investment policies.
