Internal information quality and financial policy peer effects

Liu, Y., Padgett, C. and Yin, C. (2022) Internal information quality and financial policy peer effects. International Review of Financial Analysis, 84. 102357. ISSN 1057-5219 doi: 10.1016/j.irfa.2022.102357

Abstract/Summary

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.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/108513
Identification Number/DOI	10.1016/j.irfa.2022.102357
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Elsevier
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