When Does the Peer Information Environment Matter?
68 Pages Posted: 4 Mar 2016 Last revised: 3 Dec 2017
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: Suggested Citation
Nemit Shroff
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
100 Main St.
E62-688
Cambridge, MA MA 02142
United States
6173240805 (Phone)
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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