Research On The Influence Of Peer Effects On China's Listed Corporate Policy

The classic corporate theory based on the assumption that the decision-making person is completely rational in the efficient capital market implicitly assumes that the managers are rational decision-makers seeking to maximize their utility.However,more and more capital market vision and abnormal behavior of firms shows that the decision-making of cognitive biases and irrational market will directly influence the decision-making process and results,and it is difficult to be stiffly into the traditional category of “rational economic man”.In reality,managers' irrationality is ubiquitous,and profoundly affects the company's strategic decision-making,such as corporate financing,investment,innovation and charitable donations and so on.Based on the theory of behavioral economics,the article attempts to introduce the peer effects to all kinds of corporate decision-making research,and gives a more realistic and persuasive explanation to the corporate behavior.Firstly,based on the related literatures of psychology,sociology,and behavioral economics,I establish a theoretical analysis framework of the company's peer effects.Then,based on the characteristics and approaches of these impacts,a model of the influence of the company's peer effects was established using the classical group interaction model.Meanwhile,the model parameters are used to numerically simulate the phenomenon of the peer effects of listed company to describe the actual company's decision-making situation intuitively.Then,using unique data from the China's A-share listed companies as the research sample and firms headquartered within a 100-kilometer radius as its peer firms,the article empirically investigates whether peer effects have a significant impact on companies activates of financing,investment,innovation and charity donations based on the conclusions of model and related research hypotheses.By taking advantage of variety of statistical methods,correlated effects and reflection problems are quite reasonably addressed.Finally,to deal with peer effects,this article which aimed at promoting positive peer effects and avoiding negative peer effects proposes some policy recommendations to the government,company and investor,respectively.The research of this article provides a reference for the company's rational decision-making and the public policy formulation.The results of the study are as follows:(1)The phenomenon of peer effects in corporate behavioral activities can be attributed to the combined effects of irrational conformity behaviors and rational social learning behaviors of company executives.The results of numerical simulations show that peer effects is greater than simple addition of these two effects regardless of whether the company is in WS or NW smallworld network;(2)Corporate financing activities are a dynamic process.As the company's surrounding environment changes,the company's financing activities will also change: When companies in the same region increase their debt levels,they have a positive “overflow effects” of the capital structure of other companies which led to the increase of their debt levels.Meanwhile,this phenomenon also exists in the company's long and short-term debt;(3)Similarly,China's listed companies have significant peer effects in investment behavior.The increase of investment of regional peer companies will prompt the company to increase its own investment level accordingly.In addition,young firms are more likely to imitate the regional peers' investment behavior;(4)Generally speaking,the phenomenon of peer effects in listed companies' innovation is not obvious.However,further sub-sample studies have found that private entrepreneurs are more susceptible to the peer effects,and they are actively involved in the wave of innovation which resulting in “who nears vermilion becomes red”;(5)In addition to the firms' investment and financing policy,the company has significant peer effects in social donation activities.This impact is not only reflected in the amount of corporate charitable donations,but also reflected in the decision of charitable donations;(6)The increasing distance mitigates the peer effects of abovementioned behaviors due to the company's limited attention;(7)For those poor governance,young or small firms,peer effects are more significant in above-mentioned behaviors.Therefore,this article get some kind of indication that the peer effects of corporate behavior is mostly caused by irrational factors in China's current situation because of the relatively late establishment of China's stock markets and the low level of market development.