When Does the Peer Information Environment Matter?

68 Pages Posted: 4 Mar 2016 Last revised: 3 Dec 2017

See all articles by Nemit Shroff

Nemit Shroff

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Rodrigo S. Verdi

Massachusetts Institute of Technology (MIT)

Benjamin Yost

Boston College - Carroll School of Management

Date Written: November 1, 2017

Abstract

This paper examines whether and when the information environment of peer firms in an industry affects the cost of capital for other firms in the industry. We predict and find that the peer information environment is negatively associated with a firm’s cost of capital when there is less publicly available firm-specific information and this negative association shrinks as the amount of firm-specific information increases. This paper provides evidence that information about peer-firms has externalities on the cost of capital for related firms and that these externalities are time-varying.

Keywords: Disclosure; Externalities; Regulation; Cost of Capital; Financial Accounting; Bonds; IPOs; SEOs

Suggested Citation

Shroff, Nemit and Verdi, Rodrigo S. and Yost, Benjamin, When Does the Peer Information Environment Matter? (November 1, 2017). Journal of Accounting & Economics (JAE), Vol. 64, No. 2-3, pp. 183-214, November 2017, Available at SSRN: https://ssrn.com/abstract=2741231 or http://dx.doi.org/10.2139/ssrn.2741231

Nemit Shroff

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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HOME PAGE: http://mitsloan.mit.edu/faculty/detail.php?in_spseqno=51407&co_list=F

Rodrigo S. Verdi (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

Sloan School of Management
100 Main Street E62-666
Cambridge, MA 02142
United States
(617) 253 2956 (Phone)

Benjamin Yost

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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