Internal information quality and financial policy peer effects
Internal information quality and financial policy peer effects
This paper investigates how firms' internal information quality (IIQ) influences the peer effects of their financial policies. Using earnings announcement speed and insider trading profitability difference as measurements, we find that when IIQ is low, firms are more likely to change their leverage following a similar change made by peer firms in the same industry. Our further analysis shows that this mimicking behavior hurts firms' operating performance, and is more prevalent when firms are also characterized by poor corporate governance. Overall, our results indicate that poor information quality could amplify the agency problem, therefore leading to stronger peer effects in corporate financial policies.
Financial policy, Internal information quality, Peer effects
Liu, Yongda
e81fbd22-a33f-4458-a646-09c196b0fe02
Padgett, Carol
56cfb940-227b-47e8-9b74-fe9d397a260a
Yin, Chao
719e529f-2d54-4419-9399-a09f2ec44043
11 September 2022
Liu, Yongda
e81fbd22-a33f-4458-a646-09c196b0fe02
Padgett, Carol
56cfb940-227b-47e8-9b74-fe9d397a260a
Yin, Chao
719e529f-2d54-4419-9399-a09f2ec44043
Liu, Yongda, Padgett, Carol and Yin, Chao
(2022)
Internal information quality and financial policy peer effects.
International Review of Financial Analysis, 84, [102357].
(doi:10.1016/j.irfa.2022.102357).
Abstract
This paper investigates how firms' internal information quality (IIQ) influences the peer effects of their financial policies. Using earnings announcement speed and insider trading profitability difference as measurements, we find that when IIQ is low, firms are more likely to change their leverage following a similar change made by peer firms in the same industry. Our further analysis shows that this mimicking behavior hurts firms' operating performance, and is more prevalent when firms are also characterized by poor corporate governance. Overall, our results indicate that poor information quality could amplify the agency problem, therefore leading to stronger peer effects in corporate financial policies.
Text
1-s2.0-S1057521922003076-main
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More information
Accepted/In Press date: 30 August 2022
e-pub ahead of print date: 5 September 2022
Published date: 11 September 2022
Keywords:
Financial policy, Internal information quality, Peer effects
Identifiers
Local EPrints ID: 507557
URI: http://eprints.soton.ac.uk/id/eprint/507557
ISSN: 1057-5219
PURE UUID: acefabc2-2751-4808-915b-cb987983ffbb
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Date deposited: 12 Dec 2025 17:39
Last modified: 13 Dec 2025 03:02
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Contributors
Author:
Yongda Liu
Author:
Carol Padgett
Author:
Chao Yin
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