Open Access Article Economics

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

Authors

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

  1. Department of Business Education, The University of Chenab, Gujrat Pakistan
  2. Lahore Business School, The University of Lahore, Gujrat Campus, Pakistan
  3. Department of Management Sciences, University of Gujrat, Gujrat Pakistan
  4. Lahore Business School, The University of Lahore, Gujrat Campus, Pakistan

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

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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.

Article information

Keywords
Peer effectDividend payoutidiosyncratic returnMimicking/ImitationMarket CompetitionFirm sizeInformation environmentfinancial constraints
Section
Articles
Issue
Vol. 27 No. 1 (2024)
Submitted
January 15, 2024
Published
April 4, 2024
Corresponding author
Sana Saleem
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Data Availability Statement

Data used in this study are available and provided upon request.

How to Cite

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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