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The Cost of Being Different: Peer Firm Costs of Cash Holdings
| Content Provider | Scilit |
|---|---|
| Author | Kjenstad, Einar C. |
| Copyright Year | 2016 |
| Description | Journal: SSRN Electronic Journal I estimate a dynamic game where firms make external financing decisions and hold cash taking into account the corresponding behavior of their peers. A key advantage of this approach is that I can obtain an empirical measure of peer effects that stem from decision makers' dynamic optimization problem. Using the product market to identify peer groups, I quantify the costs associated with deviating from average industry policies. Firms' cash holdings reveal that every percentage point a firm falls below the peer group median cash-to-capital ratio is valued as approximately a 1 percentage loss in operating income, or 0.2 percent of the firms capital. Firms with complex information environments and firms that rely less on R&D in their business model put relatively larger emphasis on peer firms in their decision making. |
| Related Links | https://urresearch.rochester.edu/fileDownloadForInstitutionalItem.action?itemId=33582&itemFileId=184085 https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=2972422 |
| ISSN | 10914358 |
| e-ISSN | 15565068 |
| DOI | 10.2139/ssrn.2972422 |
| Journal | SSRN Electronic Journal |
| Language | English |
| Publisher | Elsevier BV |
| Publisher Date | 2016-11-15 |
| Access Restriction | Open |
| Subject Keyword | Journal: SSRN Electronic Journal History and Philosophy of Science |
| Content Type | Text |
| Resource Type | Article |
| Subject | Public Health, Environmental and Occupational Health Psychiatry and Mental Health |
