Does Peer Matters?  How Peer Influence Firm Payout Policies: Evidence from Pakistan

Sana Saleem; Arwah Asif; Mohammad Usman; Mohammad Haseeb Khokar

doi:10.36923/economa.v27i1.242

Open Access Article Economics

Sana Saleem ⁽¹⁾, Arwah Asif ⁽²⁾, Mohammad Usman ⁽³⁾, Mohammad Haseeb Khokar ⁽⁴⁾

(1) Department of Business Education, The University of Chenab, Gujrat Pakistan, Pakistan,

(2) Lahore Business School, The University of Lahore, Gujrat Campus, Pakistan, Pakistan,

(3) Department of Management Sciences, University of Gujrat, Gujrat Pakistan, Pakistan,

(4) Lahore Business School, The University of Lahore, Gujrat Campus, Pakistan, Pakistan

https://doi.org/10.36923/economa.v27i1.242

Issue
Vol. 27 No. 1 (2024)

Submitted
January 15, 2024

Published
April 4, 2024

Keywords:

Peer effect, Dividend payout, idiosyncratic return, Mimicking/Imitation, Market Competition, Firm size, Information environment, financial constraints

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Abstract

Payout decisions are receiving more interest from an investor’s point of view. The purpose of this study is to investigate the effect of peer payout policies on a firm payout policy in Pakistan. This study employs an instrumental variable technique to overcome the endogeneity issue, which is based on peers' idiosyncratic equity shocks. The peers' payout policies have a causal link with a firm payout policy. The effect of peer pressure on firm payout is more evident in companies that compete in a more competitive market and have a good information environment. The firms that are similar in size or resource, especially young and small firms, are more responsive to their industry peers. This study provides channels for managers or policymakers to become more optimistic about formulating the payout policy to attract investors' attention and to compete more fiercely in the market.

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Authors

Sana Saleem

Department of Business Education, The University of Chenab, Gujrat Pakistan

https://orcid.org/0000-0002-9044-8620

Arwah Asif

Lahore Business School, The University of Lahore, Gujrat Campus, Pakistan

https://orcid.org/0009-0001-3509-0064

Mohammad Usman

Department of Management Sciences, University of Gujrat, Gujrat Pakistan

https://orcid.org/0000-0002-1942-2620

Mohammad Haseeb Khokar

Lahore Business School, The University of Lahore, Gujrat Campus, Pakistan

https://orcid.org/0009-0003-0017-7068

Saleem, S., Asif, A., Usman, M., & Khokar, M. H. (2024). Does Peer Matters? How Peer Influence Firm Payout Policies: Evidence from Pakistan. Innovation Economics Frontiers, 27(1), 38–55. https://doi.org/10.36923/economa.v27i1.242

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