Peer Effects in Corporate Governance Practices: Evidence from Universal Demand Laws

Pouyan Foroughi · Alan J. Marcus · Vinh Khuong Nguyen · Hassan Tehranian

75 citations0/0 files storedReview of Financial Studies

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Corporate Finance and Governance Corporate Governance and Law Political Influence and Corporate Strategies

Abstract

Abstract Firms in the same networks tend to have similar corporate governance practices. However, disentangling peer effects, where governance practices propagate from one firm to another, from selection effects, where firms with similar preferences self-select into linked groups, is difficult to do. Studying board-interlocked firms, we utilize the staggered adoption of universal demand laws across states to identify and estimate causal peer effects in governance policies. We find support for the existence of peer effects in the adoption of antitakeover provisions. The impact of universal demand laws on the governance experience of interlocking directors likely explains these effects.

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References

1997A Survey of Corporate Governance 1991Agents without Principles? The Spread of the Poison Pill through the Intercorporate Network 1997Corporate Elite Networks and Governance Changes in the 1980s 2013Do Peer Firms Affect Corporate Financial Policy?2007Financial fraud, director reputation, and shareholder wealth 2016Passive investors, not passive owners 1995Word-of-Mouth Communication and Social Learning 2014The Brain Gain of Corporate Boards: Evidence from China

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