Abstract
This study examines how peer firms influence a firm's working capital management and how the effects vary by cross-country institutional factors. Using a large sample of 20,378 firms from 34 countries over the 2000–2019 period, we document significant positive peer effects in working capital management. We show that a firm increases working capital by approximately 7.2% in response to a one standard deviation increase in peer firms' working capital. We find that such peer effects are salient in countries with low governance quality and financial development. In addition, we find that mimicking working capital has implications on shareholder value.
| Original language | English |
|---|---|
| Publisher | SSRN |
| Pages | 1-52 |
| Number of pages | 52 |
| DOIs | |
| Publication status | Published - 12 Feb 2022 |
Bibliographical note
Machokoto, Michael and Sikochi, Anywhere and Gyimah, Daniel, A Cross-Country Study of Peer Effects on Working Capital Management (February 4, 2022). Available at SSRN: https://ssrn.com/abstract=4020577 or http://dx.doi.org/10.2139/ssrn.4020577We are grateful for helpful comments and suggestions from Badryah Alhusaini, Chimwemwe Chipeta, Shirley Lu, Hayley Ma, and Abongeh A. Tunyi. We thank the University of the Witwatersrand, University of Aberdeen, and Harvard Business School for financial support. All errors are our own.
Keywords
- peer effects
- working capital management
- governance quality
- shareholder value
- cross-country study